UK: PRA Dear CEO letter on 2025 supervisory priorities for insurance firms - what to expect on management of climate risks

On 9 January 2025, the PRA published a Dear CEO letter outlining its 2025 supervisory priorities for the UK insurance sector.  The letter provides an insight into the regulator’s timeline for the year ahead and the key focus areas that firms should bear in mind.

Spotlight on the PRA's comments on Climate risk

Of course the financial risks from climate change continue to be increasingly important for some insurers (particularly for many general insurers’ underwriting strategies and risk management approaches).  Despite this,  it will be no surprise to firms (given the PRA's comments in its 2024 Dear CEO letter to UK deposit takers, international banks and insurers) that the PRA's view is that insurance firms are yet to fully embed the PRA's climate expectations.  

The PRA is expecting firms to make further progress - particularly on scenario analysis and risk management, and firms should expect engagement with supervisors in 2025, particularly those firms for which physical climate risk are most material. The PRA reminds firms of:

• its Supervisory Statement (SS3/19) on enhancing banks’ and insurers’ approaches to managing the financial risks from climate change; and
• its thematic feedback on the PRA’s supervision of climate related financial risk and the Bank of England’s Climate Biennial Exploratory Scenario exercise

In addition the PRA continues its work on updating SS3/19 to support firms' progress in improving their management of climate related financial risks, and to this end, firms should expect a consultation on proposed revisions to be published this year.

Further Resources

You can find the Dear CEO letter here.  

Our note on the wider aspects of the Dear CEO letter can be found here.  

In case you missed it, we have produced a guide in which we bring together 25 items for insurers’ and pension providers’ radars in the wider regulatory landscape in the UK and EU over the coming twelve months. Download our 25 for 2025 guide here.