The Bank of England’s Prudential Regulation Authority (PRA) July 2025 update on the Dynamic General Insurance Stress Test (DyGIST) provides insurers with the clearest information yet on what they can expect before the exercise is launched in May 2026. The update has clarified the timetable, confirmed the participants and set out how the results will be shared. For insurers, the next few months should be used to strengthen their stress testing frameworks, data pipelines and governance processes to improve resilience across the UK general insurance market. Here, we look at what actuarial, risk and finance teams should take note of in the PRA’s update and how they can start preparing.
DyGIST background
DyGIST is a stress test for general insurance companies, designed to assess how well they would cope with severe economic or insurance-related scenarios. The original announcement was made in October 2023 with the objectives of:
- Assessing the industry’s solvency and liquidity resilience to a specific adverse scenario
- Assessing the effectiveness of insurers’ risk management and management actions following an adverse scenario and
- Informing the PRA’s supervisory response following a market-wide adverse scenario.
The latest update sets out several key points:
- DyGIST will launch in May 2026, with the overall objectives and format unchanged from the initial announcement
- Large UK general insurance firms, which cover over 80% of the market, are invited to take part, as well as some branches of larger overseas organisations
- Prior to the launch, workshops will take place during September 2025 to give more details on logistics and to help firms understand their role. Further workshops will involve vendors and brokers
- The final, detailed, bad-test scenarios will only be shared during the ‘live’ phase of the exercise, meaning that firms will not know all the stress event definitions in advance and will have to work with stylised adverse events
- The PRA will publish the results after the test at an aggregate sector level, not firm-by-firm.
Firms may already be familiar with the main points, but the emphasis on withholding scenarios until the live phase is a significant development and must be factored into any planning.
Why DyGIST matters
Stress testing is not new to the insurance sector. Over the past decade, the PRA has run regular insurance stress tests, requiring firms to model the impact of predefined shocks such as catastrophe events, inflation spikes or macroeconomic downturns on their balance sheets. These exercises give regulators a snapshot of sectoral resilience and help shape policy debates over solvency and risk management.
DyGIST, however, is different. Unlike previous stress testing exercises, it is intended to test insurers’ dynamic ability to respond in real time to adverse conditions, not just their resilience under predefined stresses. This means that the regulator is assessing operational readiness and modelling flexibility and governance as much as balance sheet strength.
This approach mirrors a broader financial regulatory trend such as when banks are tested for their ability to adapt dynamically to financial stress. DyGIST asks insurers to demonstrate not only that they have enough capital, but that their systems, data and decision-making processes can cope with shocks, of whatever variety.
Implications for insurers
To ensure readiness for the May 2026 deadline, actuarial and risk teams must be aware of the following:
Framework flexibility – the PRA has made it clear that insurance firms must be able to handle a broad range of stress events, from macroeconomic shocks and high inflation rates to reinsurance withdrawal, a clustering of catastrophe events or a deterioration in reserve adequacy. Since detailed scenarios won’t be available until the live phase, internal stress testing must be flexible and able to handle a variety of shocks in order to encourage more modular, adaptable frameworks.
Data and model robustness – data pipelines and models must be ready to process new assumptions at short notice. This includes historical exposure, claims trends, expense inflation and correlation assumptions, which will all need to be reliable and retrievable. Models should be ready to run under stylised adverse events and produce results in the timeframe the PRA requires in order to avoid delays when the live scenarios are realised.
Governance and accountability – the PRA will expect to see clear roles and responsibilities across actuarial, risk, finance and senior management. Boards in particular will be expected to demonstrate active oversight of the stress testing process, not simply approve the results. Decision-making, model sign-off and audit or independent review must be in place and will be critical in judging scenario plausibility and documentation of assumptions.
Heightened scenarios – traditional stress tests often look at inflation, interest rate moves or catastrophic losses but, because the full scenario won’t be disclosed until the live phase, it’s likely that the stress tests will be severe or involve combinations of adverse events that are less familiar. DyGIST could combine multiple stresses such as high inflation + severe reinsurance retreat, weather + catastrophic event clusters or macroeconomic stress + product mispricing, for example. Insurance firms need to consider how they would handle unexpected combinations of events at severe magnitudes.
Coordination – if your models or data are supplied by third parties, you need to be confident about the timelines, granularity and flexibility of their inputs. The PRA recognises the reliance some insurers have on vendors and brokers and is organising workshops to highlight the potential for non-standard or external data inputs in some stress events.
Communication – while the results of the exercise will only be published at sector level, insurance firms should assume that regulators and boards will require both a clear narrative and visibility in reference to their vulnerabilities and response plans. They will be expected to explain their approach in regulatory submissions, detailing how assumptions were made, where the business was most exposed and what mitigation is possible.
What the PRA expects
The design of the update includes a number of themes that firms need to consider:
- Plausibility and severity – the scenarios will be stylised but adverse and firms must treat them as serious tests of resilience, demonstrating that they can withstand severe but plausible stress
- Transparency of assumptions – inflation, correlation, expense and claims inflation and reinsurance costs must all be clearly documented and justifiable
- Operational readiness – insurance firms will be required to deliver outputs in the PRA’s own timeframe, even when scenarios are unfamiliar. Delays or failures due to ‘surprise complexity’ will not be excused by the regulator
- Board involvement – senior leadership must be engaged and accountable throughout the process, demonstrating sign-off, oversight and understanding of their stress testing capability and its results
- Use of insight – stress testing is not just a regulatory exercise but should feed into business decisions, including risk management, capital planning, product pricing and reserving strategies.
Final thoughts
DyGist marks a significant moment for the UK general insurance sector. It reflects a regulator that’s increasingly focused on resilience, where capital strength, operational capability and governance are robustly tested. For many firms, it may reveal exposures or modelling weaknesses that haven’t yet been fully stress tested.
However, there is still time to prepare. The coming months are an opportunity to embed resilience into stress testing frameworks, strengthen data infrastructure and engage boards more meaningfully in discussions around risk.
For insurers, DyGIST is more than a regulatory hurdle. It’s an opportunity to gain a deeper understanding of their own vulnerabilities, to sharpen stress testing frameworks, improve data reliability and strengthen board engagement. Its real value lies not in what the PRA demands, but rather in the internal lessons it can teach. Those insurers that treat it as a genuine learning exercise rather than a compliance hurdle will not only meet regulatory expectations but also gain a clearer perspective of their own risk exposures and emerge stronger, more resilient and better prepared for future risks.
For more information on any of the issues we’ve discussed here, contact us.
