The UK insurance industry is facing some of its toughest financial challenges in years. Economic instability, rising inflation, climate-related events and tighter regulations have combined to create high levels of uncertainty. The industry’s traditional strengths – prudence and long-term thinking – are being severely tested, and the industry now requires levels of agility previously unheard of.
To succeed in this environment, insurers need financial planning and analysis (FP&A) models that are resilient, adaptive and built to withstand uncertainty. Forecasting in a storm demands more than just technical precision. It calls for strong scenario analysis, collaboration across teams and a mindset built around resilience.
Traditional forecasting methods often struggle in volatile conditions. Sharp changes in interest rates, investment performance, or claims inflation can quickly make annual plans obsolete. Meanwhile, climate change is increasing the frequency and severity of loss events and the Prudential Regulation Authority (PRA) continues to tighten expectations on solvency and risk modelling with its Solvency UK initiative.
In this context, insurers can no longer rely on static, once-a-year plans. Instead, they need FP&A models that update regularly and simulate the impact of multiple risks at once, whether that’s an economic downturn, severe weather events or regulatory change. Models enable leadership to understand how these risks interact and how they might impact solvency, profitability and liquidity.
A truly resilient FP&A model connects data, insights and action across the business. In order to achieve this, insurers should focus on four key priorities:
1. Scenario planning – scenario analysis is no longer a theoretical exercise reserved for annual planning reviews. It’s now a continuous discipline. Insurers are increasingly using scenario planning to explore the financial implications of a wide variety of events, from a sharp increase in claims due to extreme weather to prolonged low-interest environments or new regulatory capital requirements. In this way, finance teams can see how different situations affect key measures such as combined ratios, solvency capital and liquidity buffers.
The aim isn’t to predict the future, but to understand how the organisation performs under severe-but-credible scenarios aligned with the insurer’s specific risk profile. Having a clear view of ‘what if’ outcomes helps leaders to make faster, better-informed decisions when conditions change.
2. Cross-functional modelling – forecasting is most effective when it draws on insights from across the entire business. Finance, actuarial, risk and operations teams all bring unique perspectives and data. By integrating actuarial loss models directly into financial forecasts, for example, insurers can create a direct connection between underwriting risk and capital planning.
Modern integrated planning systems make it easier to connect these areas, creating real-time links between operational and financial models. This integration not only improves speed and accuracy but also helps decision-makers to see the full financial impact of operational changes, such as pricing adjustments, claims management initiatives or investment strategy.
3. Agility through technology – cloud-based FP&A tools, predictive analysis and machine learning are transforming the way in which insurers build and manage models. These technologies enable insurers to model multiple variables quickly, reforecast in real time as conditions evolve and assess the impact of external shocks almost instantly. This agility allows finance teams to move from reactive reporting to proactive scenario testing.
However, technology is only part of the solution. The bigger shift is cultural. Finance teams must be empowered to question assumptions, experiment with new forecasting techniques and work closely with data scientists and risk specialists to improve the relevance and accuracy of models.
4. Embedding governance and transparency – with regulators placing increasing focus on model risk and governance, transparency is essential. The PRA and FCA continue to expect clear documentation, version control and independent validation across all financial and risk models.
By embedding governance into every stage of the FP&A process, from model design to periodic review, insurers can improve credibility, consistency and compliance. Strong governance frameworks also build trust in financial outputs, ensuring that leadership and regulators alike have confidence in the results.
Stress-testing takes financial resilience one step further. By deliberately pushing models to their limits, insurers can expose weaknesses and plan responses before problems occur.
Quantitative stress tests measure how key ratios and profit margins respond under severe conditions. At the same time, qualitative exercises challenge leadership to think strategically and ask questions such as: How would we manage capital? Which business lines should we prioritise? What actions could restore balance?
When implemented well, stress-testing becomes a strategic management tool rather than a compliance exercise – one that supports proactive decision-making, builds confidence among boards, investors and regulators, and reinforces the organisation’s financial narrative by demonstrating readiness for a wide range of scenarios.
The goal of modern FP&A is not to predict the unpredictable but to prepare for it. As uncertainty becomes the new normal, financial planning must evolve from a backwards-looking function to a forward-facing capability that provides clarity and confidence. For UK insurers, that means moving from traditional forecasting to a more dynamic approach that combines technology, collaboration and control.
By combining robust scenario modelling, cross-functional collaboration, agile technology and disciplined governance, insurers can build FP&A models that not only withstand disruption but also help to navigate it.
Ultimately, success in this environment isn’t about avoiding the storm, it’s about building models strong enough to navigate through it.
Next time: The forgotten link: Why finance needs to lead insurance operating model transformation
Do you need assistance with any aspect of your Solvency UK planning? Contact Brighter Consultancy for more information about how we can help.