On November 13, the Prudential Regulation Authority (PRA) sent a Dear CEO letter to general insurance firms, reminding them of their obligations to set adequate technical provisions. In the letter sent by Chris Moulder, PRA Director of General Insurance, to the Chief Executive Officers of firms, the PRA comments that some firms have chosen to lower premium rates, extend their terms and scope of cover offered or have weakened their underwriting criteria in order to remain competitive in the current market conditions.
Against this backdrop there has been a rise in claims in certain lines of business and an increase in uncertainty around reserving as a result of periodic payment orders and remaining asbestos liabilities. While the market is experiencing pressure on underwriting conditions, the PRA comments that firms are releasing a high amount of prior year reserves. The Dear CEO letter sets out the PRA’s expectations of firms to ensure that they comply with INSPRU 1.1.12R and take a robust approach to the setting of reserves and maintenance of adequate oversight of their reserving process.
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