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Solvent exit planning for insurers:

Time to get ready

At a glance


  • The PRA published its consultation on solvent exit planning for insurers. If implemented as proposed, the new rules are complex and extensive. Compliance with them would require many insurers to make some investment. Notably, all insurers except UK branches of foreign insurers and firms in passive run-off, must produce and maintain a Solvent Exit Analysis (SEA) to be updated every three years. Firms for which solvent exit is a reasonable prospect must prepare a detailed Solvent Exit Execution Plan (SEEP).
  • Moreover, insurers have to put in place a Senior Manager (SM), an approved person under the Senior Managers and Certification Regime (SMCR), to be accountable for the insurer’s BAU preparations for a solvent exit, the review and approval of the SEA, the escalation and decision-making regarding a solvent exit, and, where relevant, the monitoring of the execution of a solvent exit.
  • Although the current implementation date of Q4 2025 (with rules finalised in H2 2024) seems far away, insurers should not underestimate the time and investment necessary to produce the required analysis. Insurers will have to, for example, assess the solvent exit actions available to them, maintain a set of indicators to inform when solvent exit might need to be initiated, identify barriers to execute a solvent exit, and outline the financial resources needed.
  • The rules would apply to a broad range of insurers – even non-Directive firms. Small- and medium-sized insurers will have a lot to do to produce the material required for the SEA as many of them will not have thought about exit planning to this depth before.
  • Insurers should get ready to roll up their sleeves and engage with the proposed solvent exit requirements, including by familiarising themselves with the new rules and responding to the consultation. Firms with existing exit plans will need to revisit them once the rules are finalised; where they do not, they will need to find time and resource to build them.

Who this blog is for:


Board members and senior executives working across UK insurance markets, in particular those in finance, operations, risk, regulatory affairs, and strategy teams.



The PRA has published its CP on solvent exit planning for insurers. This detailed CP outlines the PRA’s proposed new rules and a draft supervisory statement (SS) which sets out the PRA’s expectations for insurers to prepare for solvent exit. Most importantly, this includes a requirement for all in-scope insurers to produce and maintain a SEA.

The CP is open for comments until 26 April 2024. The PRA then expects to publish a final Policy Statement (PS) in the second half of 2024, with a final implementation date of Q4 2025. Notably, as the proposed rules apply to a very broad segment of the insurance market (with branches and firms in passive run-off being the sole exceptions), the CP is relevant to most insurers in the UK, regardless of size.

This article summarises the new proposed rules and possible implications of the PRA’s new CP on solvent exit for insurers.

In the coming weeks, we will produce a more detailed analysis that explores the solvent exit rules in light of other related, but different, concurrent regulatory initiatives, including e.g. insurance recovery and resolution. In that article, we will also explore the links to equivalent exit planning for non-systemic banks and building societies, as well as actions insurers can take to get ahead of the curve.

What is “solvent exit”?


The PRA defines “solvent exit” as the process whereby a firm ceases to effect and carry out contracts of insurance in an orderly manner while remaining solvent throughout the run-off. Insurers have a wide range of options at their disposal, including most commonly solvent run-off, but also the full or partial sale of a business, a Part VII transfer, a solvent scheme of arrangement or a restructuring plan.

The PRA acknowledges that recovery will be favoured by firms over solvent exit in a variety of cases. Solvency II insurers are already expected to provide triggers for management actions in stressed scenarios under SS4/18, and, in case of breaches of SCR/MCR, they also need to provide the PRA with a recovery plan under the ladder of intervention. The new principles on solvent exit planning complement existing rules as they aim to increase the likelihood that insurers can execute a solvent exit successfully (especially where recovery is not the best alternative or possible).

Where neither recovery nor solvent exit is feasible, insolvency is currently insurers’ only option - HMT’s Insurer Resolution Regime (IRR) will equip the Band of England with tools and powers to facilitate the orderly resolution of failing insurers.

Below, we illustrate how solvent exit fits within the wider process of recovery, exit planning, and resolution.

Table 1: How solvent exit planning policy for insurers fits within the wider proces

What are the proposed new rules?


The proposed rules will apply to all UK-authorised insurers other than UK branches of foreign insurers and firms already in passive run-off. The rules also apply to the Society of Lloyd’s and its managing agents.

The proposed SS sets out expectations for both the preparatory phase of the solvent exit and its execution. In particular:

  • all in-scope insurers should provide a SEA preparing for solvent exit as part of BAU activities, including setting solvent exit triggers, and actions to take if those thresholds are crossed; and
  • upon request from the PRA, or when the solvent exit indicators from the SEA indicate that a “solvent exit becomes a reasonable prospect”, the insurer should prepare a more detailed SEEP, and execute and monitor the solvent exit appropriately.

The PRA highlights that the level of detail provided in the SEA should be proportionate to a firm’s size, nature and complexity, and could, where relevant, leverage work done elsewhere. The PRA stresses that, whilst the requirements will apply on a solo basis, group-wide solvent exit plans will be allowed (subject to PRA agreement). Also, Internationally Active Insurance Groups (IAIGs) will be able to build on their existing resolution plans to comply with many of the expectations.

What should be included in the SEA?


The SEA will require insurers to identify, track and anticipate “plausible circumstances” that could lead to a solvent exit. The PRA provides several examples of scenarios that could trigger a solvent exit, including poor financial performance; non-financial issues such as operational issues; financing and/or reinsurance shortages; or changes in business strategy. The SEA must be updated whenever a material change has taken place that may affect its preparations for solvent exit, and at least once every three years.

Importantly, a Senior Manager, who should be an approved person under the PRA’s Senior Managers and Certification Regime, needs to be accountable for the insurer’s BAU preparations for a solvent exit, including the review and approval of the SEA. The SM would also be held accountable for the escalation and decision-making regarding a solvent exit, including whether a SEEP should be produced, and whether, how, and when the insurer should initiate a solvent exit. The SM should also monitor the execution of the solvent exit by relying on adequate and up to date Management Information that insurers will be required to produce.

Moreover, insurers should undertake adequate internal or external assurance activities for their solvent exit preparations. The PRA may seek its own assurance of a firm’s SEA or SEEP (including through a skilled person report under s.166 of FSMA).

The following details should be included in the SEA:


  • a set of forward-looking indicators (solvency coverage, reserves deterioration etc.) and/or qualitative terms (operational difficulties, staff turnover etc.) to identify “trigger points” at which the firm may need to initiate a solvent exit;
  • a set of solvent exit actions in case the firm needs to initiate a solvent exit. The PRA expects firms to be prudent in the valuation of their assets and liabilities, and about their ability to sell parts of the business to other insurers. Firms should include a timeline for the actions over which a solvent exit should be executed;
  • market-wide and firm-specific barriers and risks to the timely and smooth execution of the solvent exit, how these could affect the outcome and effectiveness of the insurer’s solvent exit actions (complexity of legal structure, make-up of portfolio, settlement of very long-term liabilities that cannot be settled within anticipated timelines etc.), and reasonable steps to mitigate or remove them;
  • details around the financial resources and cost to execute a solvent exit, including the “absolute minimum level” of financial resources needed to carry out a solvent exit; and
  • communication plans, including which internal and external stakeholders may be impacted by a solvent exit and how and when the insurer would communicate to them.

What should be included in the SEEP?


If “solvent exit becomes a reasonable prospect” for an insurer, it will be required to submit the SEEP within a month. That SEEP will need to be challenged, reviewed and approved by the board or other relevant appropriate senior governance committees. The insurer will then need to notify the PRA of its decision to initiative a solvent exit.

In their SEEP, insurers would be expected to update and provide further information to complement their SEA. Insurers would need to provide:

  • a detailed timeline and list of actions from the initiation to the removal of Part 4A permissions;
  • more detailed projections of the financial resources needed to complete the plan and an updated realistic valuation of assets and liabilities; and
  • an enhanced communication plan for the exit, taking into account possible negative reactions from internal and external stakeholders.

What do the new proposed rules mean for insurers?


The proposed rules are extensive and far-reaching, with all UK authorised insurers in scope, other than UK branches of overseas firms and firms already in passive run-off.

According to the PRA, 97% of all 370 in-scope firms fall within the medium to small firm category. These are firms that likely have little or no experience with regards to solvent exit planning, and we expect many of them to have to start from scratch when it comes to producing their SEA. This is likely to be a significant exercise. Lloyd’s managing agents, for example, will have to consider all the intricacies of Lloyd’s in the context of exit planning. Insurers should therefore familiarise themselves with the new rules and prepare to engage with the PRA on its consultation.

Insurers that have already done some work around solvent exit planning should revisit their analysis and perform a gap analysis to make sure they understand where there are gaps in their capabilities against the proposed rules.

Insurers that are new to solvent exit planning might want to be proactive and get ahead of the rules and plan for the time and resources needed to comply, especially as they will be finalised during a time that is already very busy in terms of regulatory change. To plan for this most effectively, insurers should consider leveraging existing related analysis as much as possible – this could for example be using reverse stress testing scenarios set out in the Own Risk and Solvency Assessment (ORSA) to identify solvent exit indicators.


We have explored further implications for insurers of the upcoming solvent exit and resolution rules in this article.