In December 2024, the Prudential Regulation Authority (PRA) published Policy Statement 20/24¹ (PS20/24) alongside Supervisory Statement 11/24² (SS11/24), setting out the final policy requiring insurers to prepare for an orderly solvent exit as part of business-as-usual (BAU) activities and to be able to execute a solvent exit if needed.

The final policy follows Consultation Paper 2/24³ (CP2/24), previously summarised by Milliman,⁴ and takes into account responses from industry stakeholders to CP2/24 alongside feedback from the PRA. The Milliman paper was issued in July 2024 and also explored the implications of the new solvent exit requirements. The purpose of this paper is to summarise the final requirements for insurers.

The new requirements will add a new “Preparations for Solvent Exit” section to the PRA Rulebook alongside SS11/24. The new rules will be applicable to all PRA-regulated insurers except for firms in passive runoff, UK branches of overseas insurers and Lloyd’s managing agents. The PRA acknowledges that amendments may be required in the future if and when the UK government introduces its planned Insurance Resolution Regime.⁵

The key components of the rules are two overarching requirements.

1. Firms must prepare for an orderly solvent exit as part of its BAU activities by producing a Solvent Exit Analysis (SEA). This should be updated following any material change to the business that may affect preparations for solvent exit, and at least every three years.
2. If solvent exit became a reasonable prospect for a firm, it should prepare a detailed Solvent Exit Execution Plan (SEEP) and monitor and manage a solvent exit. This should be updated throughout the solvent exit as required.

The new section of the PRA Rulebook and the application of SS11/24 will take effect from 30 June 2026. All firms within the scope are expected to meet the requirements by this date. Therefore, firms have approximately 18 months to prepare for the changes.

The PRA notes that firms may draw on, or adapt, work performed in order to fulfil existing regulatory requirements such as the Own Risk and Solvency Assessment (ORSA), capital management plan and recovery and resolution planning as appropriate. Any work in respect of solvent exit planning should be consistent with other areas of work within the business.

Definition of solvent exit

The PRA defines solvent exit as “the process through which a firm ceases its insurance business while remaining solvent,” where solvent means “a firm meeting its liabilities when they fall due.” This can be achieved in a number of ways, including:

• Runoff.
• Sale or partial sale.
• Mergers with another insurer or mutual.
• Part VII Transfer or Scheme of Arrangement.
• Restructuring plan.
• A combination of the above.

SS11/24 states that the solvent exit action should include the transfer and/or repayment of all insurance liabilities. It also mentions the cancellation of the insurance firm’s Part 4A permissions. The solvent exit planning should provide for a full exit under which all liabilities are resolved or transferred.

Solvent exit analysis (SEA)

All insurers in scope will need to incorporate solvent exit planning into their BAU activity and produce a SEA. This will cover the options for a firm’s runoff of policyholder liabilities and how it will continue to meet these obligations as they fall due as well as any other appropriate solvent exit strategies. The insurer should also take into account how it plans to meet all other liabilities alongside its policyholder liabilities. Currently, there is no UK regulatory requirement to have formal documentation on recovery and resolution planning in place, although the PRA’s Fundamental Rule 8 does require firms to “prepare for resolution.” However, in practice, many medium-sized and large insurers have prepared such documents and shared them with the PRA.

The SEA should take account of plausible circumstances that may result in a firm requiring a solvent exit; however, the level of detail included should be proportionate to the nature, scale and complexity of the firm. The SEA may form a section of the ORSA, capital management plan or recovery and resolution plan, or can be a standalone document, depending on what is more appropriate for the firm.

The PRA recognises that firms might execute a solvent exit for a range of reasons, including financial, nonfinancial, business viability or strategic issues, and that each of these issues might occur under either stressed or unstressed circumstances.

SS11/24 provides a comprehensive list of contents for the SEA, covering the following areas.

• Solvent exit actions: How the firm would carry out the solvent exit, including assumptions around the need for any sales, transfers or other restructuring methods, as well as ceasing PRA-regulated activities. This should also consider timelines over which solvent exit actions could be executed.
• Solvent exit indicators: Identify and monitor the quantitative and qualitative indicators that would inform a firm’s decision to prepare for and/or initiate a solvent exit.
• Potential barriers and risks to executing a solvent exit: The impact and dependencies of these factors, including under solvent exit execution. The PRA provides examples of potential barriers in SS11/24.
• Resources and costs: Financial and nonfinancial resource needs, and how access to such resources will be maintained throughout the process.
• Communication: Both internal and external stakeholders, including how and when communications will be provided.
• Governance and decision-making: Including the accountable senior manager and the ability to make timely decisions.
• Assurance activities on the solvent exit preparations. This can be internal or external as the firm considers appropriate.

Solvent exit execution plan (SEEP)

The SEEP is required only if solvent exit becomes a reasonable prospect for the firm. It should cover how the firm will completely cease its PRA-regulated activities. Firms will be expected to produce a SEEP within a timescale set by the PRA following discussion with the firm, or upon request by the PRA. The SEEP will have to be challenged by, reviewed by and approved by the board of directors or equivalent governance committee.

The SEEP must be appropriate for the firm’s business model, structure, operations, risk strategy and the circumstances which have resulted in the need for a solvent exit. The SEEP should make use of the SEA as a starting point and include justification for any assumptions made.

SS11/24 provides a list of areas to cover in the SEEP, which includes the following:

• Actions and timelines for the solvent exit: This should cover from the point of initiation to the removal of Part 4A PRA permissions.
• Identification and mitigation of barriers and risks: An update of these factors from the SEA, and a description of how they will be monitored and managed.
• A communication plan: Including anticipated reactions and the firm’s responses to them.
• A detailed action plan: Including identifying, paying or transferring liabilities, dealing with complaints, dealing with existing contractual commitments, sale or transfer and any legal or regulatory matters.
• Financial and nonfinancial resource requirements: Firms should assess these requirements on an expected and stressed basis and how they will be monitored and managed. This includes projections of premiums, claims and expenses as well as the Solvency Capital Requirement (SCR) and the Minimum Capital Requirement (MCR) over the period of the solvent exit. It should also cover realistic exit valuations for assets and liabilities and the management of various risks such as currency, reinvestment or lapse.
• Governance arrangements: Including roles and responsibilities with regard to making the formal decisions to initiate a solvent exit and to manage and monitor the execution of the solvent exit.
• Organisational structure, operating model and internal processes.

There is overlap in the content of the SEEP when compared to the SEA, although the SEEP will have to be tailored to the specific circumstance at the point of solvent exit and will also include more financial analysis and projections.

Execution of a solvent exit

SS11/24 also lays out the expectations of a firm that has decided to enter into a solvent exit or is executing one. They can be summarised as follows.

• Communication: Informing the PRA and other stakeholders of the decision to initiate a solvent exit and keeping them apprised throughout the execution, including any risks or concerns about completion.
• Continual assessment and monitoring: Continually assess whether the solvent exit actions are likely to succeed. Monitor the solvent exit indicators, using them to inform decision making.
• Ongoing compliance: Ensuring continued compliance with legal and regulatory requirements throughout the process, including meeting the PRA Threshold Conditions.⁶

Changes relative to CP2/24

While SS11/24 is materially similar to CP2/24, the most material areas of difference are:

• Implementation of the requirements of the policy has been pushed back from Q4 2025 to 30 June 2026.
• Lloyd’s managing agents are to be excluded from the scope of the policy.
• Firms can draw on work already carried out as part of ORSAs, capital management plans or recovery and resolution plans in order to meet the expectations associated with the SEA exercise. Moreover, the SEA can, if appropriate, be included as a discrete section within one of these documents.
• The PRA clarified that firms’ existing resolution plans are likely to fully or partially cover the work needed to meet the requirements of the solvent exit policy.
• The PRA confirmed that the SEA should at least set out the option of a solvent runoff in addition to any other solvent exit options the firm deems appropriate.
• The requirement to produce the SEEP within one month of a solvent exit becoming a reasonable prospect has been removed. Instead the PRA will set the timescale for the production of the SEEP based on discussions with the firm.

How Milliman can help

Our consultants have advised clients on preemptive recovery, resolution and runoff planning for a number of years, in response to both regulatory requests and as proactive internal risk management initiatives. We have also worked with regulators to assist in reporting on these plans and providing appropriate advice to address any deficiencies in a pragmatic way.

We are ideally placed to support firms with the drafting of SEA or SEEP documents, or undertaking a gap analysis against existing materials in order to provide recommendations on the most efficient way to meet the new requirements.

Areas of work where we have assisted UK clients include the following:

• Drafting of recovery, resolution and runoff plans for the PRA as well as wind-down planning for the Financial Conduct Authority (FCA). Review of these plans against best practice and support in addressing regulatory feedback.
• Facilitating recovery and/or resolution planning workshops, covering severe solvency, liquidity, operational integrity and strategic events.
• Agreeing the parameters for recovery plan triggers. Embedding these triggers into the risk monitoring framework.
• Consideration of a wide range of recovery and resolution actions, including outsourcing, capital raising, intragroup support and risks, sale and transfer, communication plan and other practical delivery items.
• Financial projections.
• Detailed work on expense savings, implementation, costs and timing.
• Developing detailed plans for orderly runoff, including planning for disposals.

If you would like to discuss how Milliman could assist you with solvent exit planning or related matters, please reach out to one of this paper’s authors or your usual Milliman contact.

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¹ Bank of England (18 December 2024). PS20/24 – Solvent exit planning for insurers. Retrieved 14 January 2025 from https://www.bankofengland.co.uk/prudential-regulation/publication/2024/december/solvent-exit-planning-for-insurers-policy-statement.

² Bank of England (18 December 2024). SS11/24 – Solvent exit planning for insurers. Retrieved 14 January 2025 from https://www.bankofengland.co.uk/prudential-regulation/publication/2024/december/solvent-exit-planning-for-insurers-supervisory-statement.

³ Bank of England (23 January 2024). CP2/24 – Solvent exit planning for insurers. Retrieved 14 January 2025 from https://www.bankofengland.co.uk/prudential-regulation/publication/2024/january/solvent-exit-planning-for-insurers-consultation-paper.

⁴ Bugg, R., Clarke, C., Ford, M. et al. (July 2024). CP2/24: Solvent exit planning for insurers. Milliman Briefing Note. Retrieved 14 January 2025 from https://uk.milliman.com/en-GB/insight/cp-2-24-solvent-exit-planning-for-insurers.

⁵ HM Treasury (26 January 2023). Insurer Resolution Regime: Consultation. GOV.UK. Retrieved 14 January 2025 from https://www.gov.uk/government/consultations/insurer-resolution-regime-consultation.

⁶ Bank of England. The PRA’s and FCA’s Threshold Conditions. Retrieved 14 January 2025 from https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/new-insurer/thresholdconditionsfactsheet.pdf.