Solvent exit planning for insurers webinar

The PRA expects firms to produce and maintain a SEP that is proportionate to the nature, scale, and complexity of the firm. For Non-Directive Firms (those outside the scope of Solvency II), this means the plan may be less detailed, but it must still meet core expectations.

The SEP should:

• Be firm-specific and aligned with the business model.
• Clearly outline the exit strategy, including triggers, operational steps, and risk considerations.
• Demonstrate a realistic and practical approach to managing a solvent exit.
• Show how the firm would protect policyholders and maintain control during the process.

In many cases, Chief Risk Officers (CROs) are taking the lead on solvent exit planning. This aligns with their broad oversight of risk and their role in embedding planning into business-as-usual governance structures.

Firms are taking different approaches depending on their complexity: 

The Solvent Exit Analysis (SEA) can either be: 

• Embedded within the Own Risk and Solvency Assessment (ORSA), or 
• Maintained as a separate document. 

Embedding the SEA within existing frameworks like the ORSA can streamline governance and reduce the need for new procedures. However, if the SEA is extensive, a standalone format may be more practical. 

The Solvent Exit Execution Plan (SEEP) is expected to be a standalone document due to its operational detail. 

Actuaries are expected to play a central role in several key areas: 

• Stress testing and scenario analysis to assess resilience under different conditions. 
• Liability run-off and reserving, ensuring technical provisions are adequate over time. 
• Investment and liquidity management, to meet remaining policyholder obligations 
• Capital assessments to confirm solvency throughout the exit process. 
• Supporting the integration of solvent exit planning into the ORSA, ensuring consistency in assumptions and risk appetite. 

The PRA has not mandated a specific assurance provider but expects firms to ensure their solvent exit plans have been subject to appropriate governance and review. Firms may choose to rely on their Internal Audit or Risk Function to assess the credibility of the plan. Alternatively, external assurance providers may be utilised to validate key assumptions, stress test wind down strategies and benchmark against industry norms.  

The level of detail should be proportionate to the firm’s nature, scale, and complexity. The SEA should clearly demonstrate that the firm has carefully considered the resources, financial, operational, and human-required to execute an orderly solvent exit. This includes providing specific and credible estimates, supported by analysis, to show that the firm could realistically implement its plan if needed. 

Firms are expected to consider the main options appropriate for a solvent exit. If run-off is the only appropriate action considered, we would expect to see some analysis on why other options such as a sale or merger are not deemed appropriate. Generally, we would expect to see more than one option in the solvent exit plan.