PRA details framework for DyGIST

Written by Adam Cadle

16/07/2024

The UK’s Prudential Regulation Authority (PRA) has detailed the framework of its dynamic general insurance stress test (DyGIST) which is due to be run in 2025.

The stress test will comprise three phases. Firstly, there will be a ‘live’ exercise, with firms presented with a sequential set of adverse events over a three-week period in May 2025 and they will be asked to react to these as they would to real events. Firms will be asked to provide initial financial impact assessments following each event, to engage with their supervisory contacts and follow their expected management action plans (in line with their risk management processes).

The second phase comprises of final firm assessment and reflections. By the end of July 2025, firms will be asked to submit a final quantitative template with updated estimates of the impact of the events (this acknowledges that during the ‘live’ exercise loss estimates may be based on scaling up exposures or applying other shortcuts to meet the demands of providing early estimates that would be required in a crisis) and a qualitative questionnaire intended to draw out any risk management learnings.

Thirdly, DyGIST will be a core component of 2025 supervisory activity for firms in scope. The PRA intends to publish the findings of the exercise in Q4 2025, and dependent on conclusions, individual firm findings will also feed into supervisory plans for 2026. The PRA expects to run a single scenario with multiple events for all participants, and as noted previously, results will be published on an aggregate industry level only.

The PRA has invited 80% of its regulated general insurance market to participate.

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