The UK’s insurance industry is urging the PRA to rethink its live crisis simulation, citing heavy reporting demands and unrealistic scenarios in a stress test that pushed firms “to their absolute limit”.
The PRA’s stress test which ran over three weeks in May, subjected insurers to successive crises including a US West Coast earthquake, a Gulf of Mexico hurricane, a UK windstorm, European floods and a cyber event.
"The accumulation of scenarios in such a short time frame was very unlikely," said Nafisah Hussain, director of public policy at the International Underwriting Association, a trade body for insurers and reinsurers in the London market that has fed its views back to the PRA.
Speaking to Reuters, Hussain warned it might be "overly burdensome" to run similar tests regularly.
"There is only so much that regulators would be able to infer from those results, from a policy perspective, at least," she said.
Insurers have told the PRA the tests put significant pressure on their internal resources, with some firms forced to bring in technical experts at short notice and cancel staff leave as it became clear what was being demanded of them exceeded expectations, industry sources said.
