May 2026 signals the commencement of the Prudential Regulation Authority’s (PRA’s) Dynamic General Insurance Test (DyGIST). Involving over 80% of the UK’s largest general insurance firms and Lloyd’s market organisations, the test is not simply a regulatory exercise but rather determines the industry’s ability to respond dynamically to severe, market-wide shocks.
Here we look at the background to DyGIST and, with the test now underway, ask: Is your firm really ready?
What is DyGIST?
We first discussed DyGIST last year and how the PRA wanted to encourage firms to strengthen their operational resilience, governance, and risk functions to respond to adverse scenarios. Since then, there have been a series of workshops and engagement sessions to bring insurers, brokers and third-party vendors up to speed on what’s required. Originally scheduled for 2024, the PRA postponed the launch until May 2026 to reduce pressure on firms adapting to the new Solvency UK reporting requirements, which will come into effect on 30 September 2026.
The emphasis has been on how they manage:
- Underwriting decisions
- Reserving actions
- Capital resilience
- Claims pressures
- Liquidity responses
- Reinsurance strategies
- Operational capability in real-time under stress conditions.
DyGIST also tests:
- Operational resilience
- The speed and quality of executive decision-making
- Crisis governance and response frameworks
- Data accessibility
- Internal communications
- Governance oversight
- Exposure management
- Reinsurance effectiveness.
While previous stress tests focused on static scenarios and theoretical impacts on balance sheets, DyGIST is taking a far more demanding approach by asking how firms respond dynamically under sustained pressure.
Most firms consider themselves prepared for DyGIST, but for those that still rely on fragmented systems, outdated reporting processes, or incomplete crisis management frameworks, their readiness is under scrutiny.
Why DyGIST matters
The insurance sector has faced unprecedented and increasingly complex challenges over recent years, with insurers dealing with continued uncertainty from a broad range of interconnected threats including:
- Climate-related losses
- Geopolitical uncertainty
- Inflation-driven claims costs
- Cyber threats
- Supply chain disruption
- Increasing dependency on operational technology and third-party partners.
These factors have fundamentally disrupted the risk landscape and highlighted regulatory concern around the interconnectedness and complexity of modern insurance risk. This has led to insurers being required to understand how to cope with multiple stress events simultaneously and over a protracted period. DyGIST gives the PRA the opportunity to evaluate not simply whether insurers have sufficient capital to see them through volatility, but also whether an organisation can make the right decisions during stress events that may evolve rapidly.
Key areas of focus
The PRA’s ‘live’ test is taking place over three weeks in May 2026, with the scenarios revealed only just before the exercise. Prior to this, the regulator expects firms to have focused on several critical areas:
Stress and scenario testing – firms are required to evaluate whether their existing stress-testing frameworks are sophisticated and flexible enough to handle prolonged, dynamic disruption scenarios. This means that they should review:
- Catastrophe models
- Cyber aggregation exposure
- Liquidity assumptions
- Reserving methodologies
- Operational resilience.
Governance structures – regulators are placing increasing emphasis on precisely how firms make decisions in crisis situations. DyGIST requires that boards and senior management demonstrate effective:
- Escalation procedures
- Crisis management protocols
- Management information flows
- Decision-making responsibilities.
Data quality and reporting – high-quality, accessible data will be essential throughout the exercise. However, many firms continue to face the challenges of fragmented systems, inconsistent data and legacy technology infrastructure. DyGIST has the potential to expose any weaknesses in their ability to rapidly interpret risk information and produce timely management reporting.
Operational resilience - DyGIST also aligns with the Bank of England’s proposals to enhance operational resilience in the financial sector. Insurers must have assessed whether vital business services could remain operational within acceptable impact tolerances during severe disruption scenarios. This must encompass a review of third parties, technological resilience and internal continuity planning.
Firms that have prepared effectively and can demonstrate embedded resilience will be at an advantage compared to their counterparts that postponed preparation until closer to the deadline.
A response to regulatory shifts
DyGIST represents a response to evolving UK financial regulation with a greater emphasis on forward-looking resilience testing. Both the Bank of England and the PRA are placing increasing focus on how firms respond to complex, interconnected and fast-moving stress events, rather than to isolated incidents. This reflects a global reality shaped by developments such as the COVID-19 pandemic, cyberattacks, inflationary shocks, and geopolitical volatility.
Many organisations have already been preparing for DyGIST in anticipation of this month’s exercise, reviewing scenario testing, evaluating governance arrangements and strengthening operational resilience to ensure that they meet the PRA’s requirements.
Final thoughts
With DyGIST happening now, how insurance firms respond to the exercise will reveal exactly how they deal with questions of resilience, adaptability and operational effectiveness during multiple stress events. It’s a significant moment.
Well-prepared organisations that have already invested time and effort into early stress-testing capabilities, governance structures, data infrastructure and operational resilience, will be far better positioned to deal not only with the PRA’s first exercise of its kind, but for an increasingly complex and uncertain future.
To discuss any of the issues raised here, contact us.
