The Prudential Regulation Authority (PRA), has announced it has suspended its plans to undergo a stress test of the UK insurance sector to allow firms to concentrate on their efforts to support the fight against COVID-19.
The PRA and the Bank of England announced a number of initiatives in the light of the growing pressure in the financial services sector from the global pandemic.
In a statement the PRA said: “The PRA is announcing further details of its plans to support firms and enable them, and the PRA, to focus their resources on the highest priority work. The PRA’s work, alongside that of the wider Bank, is focused on ensuring that banks and insurers can play their part in supporting the UK economy to respond to the significant impact of Covid-19.”
As such they have said they will re-prioritise several areas of the authority’s work.
On climate change it explained: “Recognising current pressures on firms, and in light of the responses to the December 2019 Discussion Paper on the Climate Biennial Exploratory Scenario, the PRC and FPC have agreed to postpone the launch of the exercise until at least mid-2021. This delay reflects a desire to maintain the ambitious scope of the exercise, whilst giving firms enough time to invest sufficiently in their capabilities to allow them to deliver to a high standard.
“Climate change represents a material financial risk to firms and the financial system and is a strategic priority for the Bank. Whilst Covid-19 represents a present risk, minimising the future risks from climate change requires action now. As such, the Bank will continue its work to better understand and mitigate these risks.
Those risk include:
- Continued support for firms’ enhancements of their climate risk capabilities. To aid this, this summer the PRA will issue follow-on guidance on the PRA’s 2019 Supervisory Statement on enhancing firms’ approaches to managing the financial risks from climate change. Furthermore, the outputs from the Climate Financial Risk Forum (an industry group set up in 2019 to bring together leading practice across the financial sector and chaired jointly by the PRA and FCA) will be published in the summer.
- Continuation of the Bank’s international engagement on climate issues. This includes working with other central banks within the Network for Greening the Financial System, through which guides on key issues like supervision and scenario analysis will shortly be published. The Bank will also assist the Government with its preparations for COP 26; and
- Continued focus on embedding climate disclosure across the financial system, including through the Bank’s own disclosures.
On the planned insurance stress test the PRA has said it is to pause further work on the Insurance Stress Test, “given other pressures on firms and the need to focus on Covid-19 specific stresses”.
“We will therefore not be publishing the results of last year’s test (IST2019) and will postpone the next Insurance Stress Test to 2022, with a view to seeking feedback from firms on the proposed design during Q4 2021,” it added.
The Bank and the PRA also revealed changes to resolution measures aimed at “alleviating operational burdens on PRA-regulated firms”.
“In addition to these specific areas the PRA is continuing to make other adjustments and review ongoing plans, to support firms while ensuring their safety and soundness is maintained. This includes postponing or scaling back planned reviews, consultations and policy announcements where suitable; wide-ranging reprioritisation of the PRA’s internal initiatives and development workstreams; and deferring governance decisions on some less critical matters, where possible,”.