Solvent Exit Requirements

Process and planning perspective

• Insurers must prepare a Solvent Exit Analysis (SEA) to prepare for an orderly and solvent exit from the market. This should include the following.
• Identifying actions needed to transfer and repay all liabilities, as applicable.
• Monitoring scenarios and indicators that inform when the Board may want to trigger a solvent exit. 
• Identifying the potential barriers and risks to the execution of a solvent exit.

Action perspective

Insurers are then expected to do the following.

• Take reasonable steps in BAU to mitigate or reduce barriers to execute a solvent exit.
• Produce a Solvency Exit Execution Plan (SEEP) based on the SEA, if a solvent exit becomes a ‘reasonable prospect’.

While the implementation of the requirements has been delayed to 30 June 2026, the PRA has also clarified that firms must have a SEA ready for submission by that date.

Tips for successful SEA delivery

From the perspective of delivering a SEA, we have identified three main tips for success.

1. Integrate with existing BAU processes
   This is the equivalent of integrating your fitness with your daily routine. The PRA has helpfully clarified that insurers may draw on analyses conducted for the ORSA, capital management, and resolution planning. This is a very useful clarification, which we raised in Crowe’s response to the PRA consultation. Insurers should avoid reinventing separate processes to meet the expectations of the SEA.
   
   In practice, this suggests that there are no regulatory hurdles to, for example, integrate solvent exit scenarios and indicators into an insurer’s range of stress testing and capital adequacy scenarios.
   
   
2. The identification of barriers to exit 
   The PRA policy statement offers a small glimpse of the range of considerations that insurers will need to consider to ensure this works, such as reinsurance arrangements. While the requirements originate from the PRA, it is important to recognise that barriers to solvent exit may also include operational and conduct issues that need to be considered in the context of the insurer’s business model.
   
   
3. The consideration of what barriers to exit to address
   We believe that it is appropriate to expect insurers to take reasonable steps to mitigate or remove potential barriers. This does not mean that all the barriers would be eliminated as part of the planning process, and Boards and the PRA will need to accept that potential barriers to exit will always exist and the appropriate pace to address them.
   
   This is effectively an organisational resilience challenge: balancing mitigation in advance of an event and remediation that can take place more easily after the event. Here, it means considering the extent to which barriers to exit are addressed more effectively before the firm is actively pursuing an exit, i.e., as part of an SEA, and addressing them more effectively while pursuing an exit, i.e., as part of its SEEP.

Summary and implications

Overall, it seems to us that insurance companies are more likely to change their portfolio of insurance products they sell than to go through a solvent exit. However, optimising the portfolio of insurance products sold often includes a sale or a transfer of an aspect of the business, which may be facilitated by the consideration of barriers to solvent exit. Thinking about this in advance puts organisations in a far more advantageous and resilient position.

For the individual, the benefit of being aware of their own mortality would be changing their lifestyle. For an insurer, a solvent exit is an organisational resilience challenge; a better understanding of the risks you face helps you think through barriers and ways to mitigate them.

How can Crowe help?

Crowe’s Consulting team is experienced in risk management and actuarial modelling. Our team has supported insurers in enhancing their readiness for recovery and resolution planning and stress testing frameworks. We can help meet the solvent exit requirements in a way that meets the specific needs of your business and without creating a new process to meet regulatory requirements.

If all liabilities cannot be repaid in full, Crowe’s licensed Insolvency Practitioners can provide advice to directors on how best to manage and navigate that eventuality. If the Company is solvent, our Insolvency and Restructuring team can help with a solvent liquidation process, ensuring a managed winding up of the Company, with possible tax benefits for shareholders.

For more information, contact Isaac Alfon and Lloyd Richards.