Last year, the PRA published SS11/24 outlining new requirements for solvent exit planning for insurers. With a deadline of 30 June 2026, firms need to create a robust Solvent Exit Analysis to leave the market safely and support financial stability.
Firms’ progress varies significantly across the sector, depending on the size and complexity of the insurer’s operations. Many have established project teams and governance structures, and are weighing up options for the solvent exit. But at this juncture, it can be hard to see the wood for trees and it’s easy to veer off target.
Solvent exit planning for insurers
Five tips to keep your solvent exit on track
1. Consider all solvent exit options
For example, splitting the business into two or more tranches, which could unlock a wider range of exit opportunities and affect pricing. This may be a complex process, depending on the size, number of services lines and nature of the insurer’s business. Similarly, it’s important to consider reinsurance contracts, and any limitations they may pose for the solvent exit strategy.
While putting together the plan, it’s essential to benchmark all underlying assumptions to make sure they are genuinely feasible. For example, by gauging how a Part VII transfer works in practice, including costs, internal and external resources, and any contingencies needed.
It’s also essential to consider how external factors can affect solvent exit plans and a sensitivity analysis can help gauge elements that could affect liquidity or create solvency risks.
2. Take a practical approach to finances
During a solvent exit things generally take longer and cost more than expected. So, it’s important to factor that into the budget. For example, the cost of commuting reinsurance or terminating service provider contracts can add up. Many firms have a high volume of contracts, so it’s essential to review all termination clauses to factor in the exit fees. There are also people and HR costs to consider, including retention and redundancy payments or consultancy fees.
Staying on top of finances is crucial. Firms need a granular balance sheet, with frequent (monthly or quarterly) capital and cashflow forecast throughout the solvent exit.
3. Take a practical approach to people
Many people in an organisation will leave during a solvent exit process either through resignations or redundancies resulting in potential disruption to business operations and additional costs. The Solvent Exit Analysis should consider key person risk and the need to outsource talent. In an extreme scenario, this could have a knock-on effect on generating new business during the solvent exit, which may limit the firm’s exit options to a portfolio run-off
Firms may need additional support from external advisors to complement in-house expertise. So, operational and financial plans should factor in the cost of the and any associated costs from initiating the solvent exit process through to the point of liquidation.
4. Work collaboratively
The Solvent Exit Analysis is not a hypothetical document and it’s important to be realistic about how it will be put into action. As such, it needs significant input from a range of teams across the firm – not just assumptions about what that team can, or will, do during the solvent exit.
Key teams to reach out to include:
- Human resources – to advise on the resources required, outsourcing and associated costs.
- Finance and actuarial – to consider the financial resources and availability of data before and during the solvent exit.
- Risk management – to assess solvent exit scenarios, establish triggers and indicators for on-going monitoring and identify barriers, and mitigants for the solvent exit.
- Compliance – to consider the impact on customer and ongoing compliance with all regulatory requirements.
- Operations – to inform operational plans and confirm key people and critical processes that need to be maintained throughout the solvent exit process, including specific exit actions.
- Marketing and communications – to seek input into communication plans and tailor them for a range of stakeholders.
- Regulatory affairs – to effectively manage all engagement and communication with the regulator.
- Governance and assurance – to ensure that the solvent exit planning documentation will be reviewed by the relevant governance and assurance bodies.
- Legal counsel – to review any contractual implications of the solvent exit and appropriate communicate this information to all internal and external stakeholders.
A collaborative approach can also reduce duplication of efforts and draw on key documents such as the Own Risk and Solvency Assessment (ORSA), existing business recovery and resolution plans, financial statements, risk register and business plans.
Effective board involvement is vital, and senior oversight can encourage greater collaboration, and escalation routes for teams that are not engaging effectively.
5. Take lessons learned from the banking sector
Non-systemic banks and building societies are subject to comparable solvent exit analysis rules, with an earlier compliance deadline of 1 October 2025. These firms will face many of the same challenges as insurers, so tracking and reviewing PRA feedback can help achieve good practice from the outset.
Effective project management is a must
With so many elements to consider, insurers need robust project management to spearhead the solvent exit analysis process, and co-ordinate stakeholder input. Clear goals, deadlines and points of contact will keep everyone moving in the right direction, and to the right timescales. Seeking additional support to benchmark key assumptions or provide project assurance, can give senior stakeholders confidence that the Solvent Exit Analysis is robust and fit for purpose.
For further information, contact Klaas de Vries or Russell Simpson.
