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      July 2026

      The PRA Dynamic General Insurance Stress Test (DyGIST) live exercise took place across three weeks in May 2026. The first exercise of its kind, it was designed to assess the general insurance industry's ability to manage crises by simulating significant events unfolding over time and requiring insurers to respond promptly to PRA requests, as they would in a real crisis. The multi-event stress included cyber disruption, natural catastrophes and a market downturn, and insurers were required to respond as events evolved rather than in isolation.

      In a real scenario, firms would have had access to market data and trade body communications, and this would help inform their response to the events. Additionally, insurers would also need to consider consumer impacts and their corresponding obligations under the Consumer Duty and other FCA requirements. In the DyGIST, market data was not available and responding to policyholder behaviour was not tested.

      Despite these scope limitations, and the resource-intensive nature of the exercise, many participants considered it to be insightful and a valuable demonstration of financial and operational resilience. Below, KPMG in the UK has outlined five key lessons that insurers can take forward from the DyGIST.

      Insurance stress testing: what might come next? KPMG in the UK view
       

      GENERAL INSURERS


      The DyGIST has brought out valuable lessons for the general insurance industry. In particular, the qualitative questionnaire completed by firms after the exercise required deeper reflection on both outcomes and process, providing insights that should be useful for firms and supervisors alike. The PRA will also no doubt draw on these findings to inform their supervisory plans.

      However, given the resource-intensive nature of the exercise, our view is that the dynamic element is unlikely to be repeated for every exercise in the two-yearly GI stress testing cycle.
       

      LIFE INSURERS


      For life insurers, DyGIST has highlighted relevant learnings that can also be applied to the life sector. These insights extend to preparing adequately for PRA stress tests, strengthening firms’ own internal exercises in testing financial and operational resilience and real-life crisis response. The exercise highlights the importance of regulator engagement, rehearsals, making decisions with imperfect data, identifying crucial teams and having clear governance and ownership – all of these are valuable lessons that life insurers can apply in their own risk management.

      As the regulator has an increasing focus on the evolving nature of risks to the life insurance sector, firms may find that the PRA could apply a similar ‘dynamic’ approach to a future Life Insurance Stress Test.

      Five key lessons

      DyGIST showed that effective engagement with the PRA is a key part of firms’ response and should not be treated as a secondary activity – in terms of their importance or timing. The dynamic nature of the exercise, volume of scenario information and need to explain emerging outputs meant insurers had to maintain clear, timely and credible regulatory communication while still developing their analysis.

      The lesson is that firms should plan explicitly for proactive supervisor engagement, including who owns messages, how assumptions are explained, and how updates are kept consistent with earlier submissions. This can help avoid confusion and strengthen confidence in the firm’s overall response. Insurers that are part of cross-border groups should also factor in likely engagement with group supervisors, as the DyGIST has elicited interest from other regulators in the supervisory college. Proactively maintaining a good relationship with your supervisors outside stress testing exercises will also always be helpful.

      DyGIST demonstrated that dynamic stress testing places immediate pressure on firms to mobilise quickly, coordinate across functions and respond to a high volume of scenario information from day one. Firms that had completed dry-runs appeared better able to clarify roles, align quantitative and qualitative workstreams, and build confidence in outputs under compressed timelines. The key opportunity is to use rehearsals to test whether mobilisation arrangements work in practice, including whether teams can access critical information, manage dependencies on group entities and third parties, and produce decision-useful outputs at pace. This will help firms identify practical gaps before a live stress event, improve consistency when scenarios evolve quickly, and demonstrate a credible crisis management response to the regulator.

      The exercise required insurers to respond dynamically to evolving information and incremental scenario updates, often revisiting assumptions as further detail emerged. The PRA’s focus on timely financial outputs meant firms had to explain and justify early numbers before results were fully refined. This highlighted a tension for teams used to detailed analysis and precise estimates. A key lesson is that stress testing capability should include credible ranges, transparent assumptions and timely judgement calls. There is an opportunity to strengthen playbooks so that imperfect data does not prevent action, while ensuring assumptions remain documented, challengeable and consistent across the business. 

      The live phase placed strain on specialist teams, especially exposure management and reinsurance. DyGIST highlighted the practical difficulties in understanding contract terms and netting positions while under pressure, while also ensuring that important BAU activities (e.g. reinsurance contract renewals) were not neglected. Given that exposure management is a PRA supervisory priority, firms should ensure the learnings from DyGIST are retained and acted upon. For example, in crisis planning, insurers could prioritise a small number of business-critical decisions, such as underwriting, portfolio management and reinsurance. This would make these capabilities more effective in practice even where data remains imperfect.

      DyGIST demonstrated the importance of clear ownership, governance, decision rights and escalation routes, as well as firms’ confidence in proposed actions and the evidence needed to demonstrate that these actions are realistic. This includes distinguishing between established management actions and scenario-specific responses, and assessing the feasibility of the latter, including any reliance on group entities and third parties.

      While the DyGIST exercise focused primarily on producing timely numbers for the PRA, a real stress event should also prompt boards to consider a longer-term strategic response to the new business environment. Crises can create opportunities as well as challenges, and an insurer’s ability to respond quickly can be critical to capitalising on those opportunities.

      To do so, firms will need to demonstrate to their boards and regulators that downside risks are being effectively managed, allowing them to focus on how best to respond to the new environment. To facilitate this, insurers should seek guidance from their boards on the strategic changes that may be appropriate under different scenarios. This can help refine playbooks in advance and make decision-making and execution more effective during a real-life crisis.

      How KPMG in the UK can help

      KPMG can support insurers in turning the lessons from DyGIST into practical improvements to stress testing, crisis response and supervisory engagement. This includes helping firms to:

      • review lessons learned from DyGIST and identify priority actions across governance, mobilisation, data, modelling, assumptions and regulatory communications;
      • design and facilitate dry-runs, desktop exercises and dynamic stress testing rehearsals that test both financial and operational resilience under time pressure;
      • strengthen stress testing frameworks, playbooks and escalation routes so that firms can make timely, well-evidenced decisions with imperfect information;
      • support board and senior management engagement, including challenge sessions on management actions, regulatory engagement, strategic responses and decision-making in a live crisis;
      • assess dependencies on group entities, outsourced providers, brokers and other third parties, including the practical resilience of critical processes and data flows; and
      • prepare for future PRA stress testing activity, including potential dynamic exercises for general or life insurers, by aligning regulatory expectations with practical execution.

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