On 17 November 2025, the Bank of England released the results of the 2025 Life Insurance Stress Test. What makes this year significant is that it’s the first time the exercise has been carried out under the new Solvency UK regime, which came into force in 2024. The Prudential Regulation Authority (PRA) also plans to publish individual firm results for the core scenario on 24 November 2025 — a notable shift from previous years.
From my perspective, the headline is reassuring: the 2025 Life Insurance Stress Test (LIST 2025) shows that the UK life insurance sector is in a strong position. Even under a severe market stress scenario — involving falling risk-free interest rates, declining equity and property values, and widening spreads accompanied by defaults and downgrades — the industry continues to demonstrate resilience.
This is only the third time the PRA has asked UK life insurers to participate in such a stress test, and the first since the move to Solvency UK. One of the key changes under this new regime is the decision to publish individual firm results alongside the sector-level outcomes. I see this as an important enhancement: greater transparency and firm-level accountability should help strengthen risk management practices across the sector.
This year’s exercise focuses on the solvency positions of individual UK life insurance entities as at 31 December 2024. LIST 2025 covers eleven of the largest insurers operating in the bulk purchase annuity (BPA) market — a critical segment of the industry. Collectively, these firms account for over 90% of annuity liabilities and play an essential role in supporting long-term financial security for policyholders, as well as making investments that contribute to UK economic activity.
The test does not look at impacts at the group level. It also allows all firms to use a consistent set of predefined management actions when calculating their stressed positions. In reality, firms may have a wider set of actions available, but the standardised approach helps ensure comparability.
Under the PRA’s core scenario — designed to be severe yet plausible — the participating firms experience a combined £8.6 billion reduction in capital surplus above regulatory requirements, with £12.9 billion of assets being downgraded to below sub-investment grade. Even with this deterioration, the sector remains robust: the aggregate solvency capital requirement (SCR) coverage ratio falls from 185% to 154%, and every firm still meets its regulatory capital requirements. This reinforces my view that the sector entered the exercise from a position of strength and with good management, the sector will continue to maintain this strength.
The main drivers of the fall in SCR coverage include credit downgrades, defaults, and lower interest rates. The sector’s exposure to residential property values is also a factor, particularly given the role many firms play in equity release mortgage lending.
Beyond the core scenario, LIST 2025 also includes two exploratory scenarios reflecting evolving risks within the BPA market. These explore:
(a) asset concentrations as firms continue optimising the risk/reward balance in their portfolios; and
(b) funded reinsurance (FundedRe), which is increasingly used in BPA transactions.
The results show that the industry is capable of modelling these more complex scenarios effectively. The PRA has signalled it may further develop these exploratory tests in future cycles.
The aggregate outcome of the exploratory asset concentration scenario also demonstrates overall resilience, though the PRA acknowledges limitations in this scenario that it intends to refine going forward.
While it’s encouraging to see the sector withstand the stresses examined in LIST 2025, I’m mindful that regulatory exercises like this are not a substitute for firms’ own risk and solvency assessments. Boards and senior management still have the responsibility to identify, understand, and manage their risks — and to ensure those assessments remain forward-looking as market conditions and business models evolve.
The PRA continues to expect firms to maintain strong risk management capabilities, including their own stress testing, to check their resilience against a wide range of downside scenarios and to guide capital planning. LIST 2025 is an important piece of the puzzle, but it’s only one part of a much broader risk management framework.
How Cosegic can help
If you’re considering what these findings mean for your organisation’s governance, risk, or compliance processes, we are always happy to have a conversation.
