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Home > Prudential Regulation Authority > Smaller insurers - FAQs

Smaller insurers - FAQs

Smaller insurers  |  Solvency II  |  Non-Directive firms  |  FAQs  Seminars



Solvency II


Stress Testing




We are looking to effect or carry out contracts of insurance - how do we get authorised?

The Prudential Regulation Authority (PRA) will assess applicant insurers from a prudential perspective, using the same framework that is employed for supervision of existing insurers. Thus, the PRA will determine whether, if authorised, an applicant insurer would meet the Threshold Conditions, at the point of authorisation and on an on-going basis. This includes an assessment of whether it could exit the market in an orderly way. At the same time, the Financial Conduct Authority (FCA) will assess applicants from a conduct perspective. An insurer will be granted authorisation only where both the FCA and the PRA are satisfied that an insurer meets the relevant requirements. For further information refer to the Authorisations section of the website under related links on the right hand side.

Alternatively contact the Firms Enquiries Team on:

Phone:  020 3461 7000


What is PRA’s approach to the supervision of small insurers?

The intensity of the PRA’s supervisory activity will vary across insurers. The level of supervision will principally reflect the PRA’s judgement of an insurer’s potential impact on policyholders and on the stability of the financial system, its proximity to failure, and its resolvability. Other factors that will play a part include the type of business done by the insurer and the complexity of the insurer’s business and organisation. Further information about the approach can be found on The PRA's Approach to insurance (see Related Links).

Do we have a supervisory contact?

From April 2013 the supervision of smaller insurers will no longer be undertaken by a single team. The prudential supervision area of your firm will be supervised by the PRA. The conduct supervision area of your firm will be supervised by the FCA. For all routine prudential enquiries contact the Firm Enquiries Team on:

Phone: 020 3461 7000

How often do we expect supervisory visits from the PRA?

Small insurers will not be visited by the PRA on a fixed, regular schedule. Notwithstanding this approach, all insurers, regardless of category, will be subject to on-site work by the PRA - with some period of notice - at any time. In 2016 the Smaller Insurers Team has conducted pilot regional visits, meeting a selection of firms from a region. It is expected that this will continue into 2017.

Solvency II

What is Solvency II?

Solvency II is the European-wide system for insurance regulation. Its main objective is the adequate protection of policyholders and beneficiaries and it sets out a risk-based and harmonised EU-wide approach to the assessment of capital adequacy and to risk management and reporting for insurers. In a number of areas, the PRA’s objectives and the requirements of Solvency II will be closely aligned. For example, the Prudent Person Principle within Solvency II will be a tool to implement the Threshold Condition that business must be conducted in a prudent manner and assets must be appropriate; the Own Risk and Solvency Assessment (ORSA) will support the Threshold Condition that insurers must have appropriate non-financial resources and robust risk and capital management systems; and the Actuarial Function, Internal Audit and Risk Management Function requirements will help ensure that insurers satisfy the Threshold Conditions that business must be conducted in a prudent manner.

Are we subject to Solvency II?

In general terms, Solvency II applies to all insurance and reinsurance firms, including those firms in run off, with gross premium income exceeding €5 million or gross technical provisions in excess of €25m. Firms who have written liability business are subject to Solvency II irrespective of the level of their premium income. Firms which are not subject to the scope of Solvency II may be loosely referred to in documentation as “Non-Directive Firms", "non-solvency firms" or "out-of-scope firms". 

Stress Testing

How do the reverse stress testing requirements apply to my firm?

Reverse stress-testing is part of our overall stress-testing regime and requires firms to:

  • clearly identify and assess the scenarios that renders a business unviable; 
  • analyse the likelihood of these scenarios occurring; 
  • determine the potential impact of this scenario on the viability of the firm; and
  • take mitigating actions now, or put in place triggers for actions in the future.

The PRA will consider it important for insurers’ senior management and boards to have an explicit understanding of the circumstances in which their firm might fail.

Which firms will need to do reverse stress testing?

As standard, all banks, building societies and Solvency II insurers must conduct reverse stress testing.

How often will we be required to conduct a reverse stress test?

Firms should conduct this at least once a year. It is expected that it should be included within the ORSA.

At what level should we conduct reverse stress tests?

The reverse stress-test must be conducted on a solo-basis for the firm. In addition, reverse stress testing must be conducted on a consolidated basis for groups in the following circumstances: 1) Members of a group (including insurance groups that are required to maintain group capital); 2) UK consolidation groups; 3) Non-EEA sub-groups. This requires a combination of top-down and bottom-up approaches. The principle of proportionality applies when solo entities are considered to be immaterial in a group structure.

We are considering expanding and branching out to other lines of business. Are there any restrictions?

Further information can be found under the Permissions and Waivers Chapter of the PRA Rulebook.


What do we need to report?

Further information on notification requirements can be found in the Solvency II Reporting Chapter or the Non-Solvency II Reporting and non-Directive: Reporting to the PRA Chapters of the PRA Rulebook as applicable.

How do we submit our returns?

Electronic Copy must be sent to: Do not send returns to your supervisory contact as this may delay the processing of your return. 

What do the PRA need to notified about and when?

Further information on notification requirements can be found in the Notifications Chapter of the PRA Rulebook.

For all routine supervisory queries firms should contact the Firm Enquiries Function:
Phone:  020 3461 7000
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