PRA Business Plan 2025/26: Subtle Signals Of A Strategic Shift

The Prudential Regulation Authority (PRA) has published its Business Plan for 2025/26, outlining a strategic agenda that reflects not only evolving financial sector risks but also subtle recalibrations in regulatory posture. While the plan maintains continuity in many areas, nuanced shifts in language and emphasis suggest a regulator increasingly attuned to government priorities around innovation, growth, and competitiveness—without relinquishing its core mandate of prudential soundness.

The 2025 Strategic Objectives

The PRA’s primary and secondary statutory objectives remain unchanged, albeit with some subtle changes in language to how it describes its priorities for 2025 that signal a slight shift in approach to the delivery of those. It continues to pursue two primary aims: promoting the safety and soundness of PRA-authorised persons and protecting policyholders in the insurance sector. These are supported by two secondary objectives—facilitating effective competition and supporting the international competitiveness and long-term growth of the UK economy, particularly within financial services.

Against this backdrop, a multi-year trend is emerging. The total number of PRA-regulated insurers has declined over the past year, with only the general insurance sector seeing growth. This may partly reflect market consolidation via mergers and acquisitions. Yet, the PRA’s efforts to streamline authorisation processes and enhance operational efficiency also suggest a clear desire to lower barriers to entry and foster a more vibrant, competitive regulatory environment.

  (Source: PRA Business Plans, 2022-2025)

Revised Strategic Priorities: Subtle, Strategic Shifts

The PRA’s four strategic priorities remain consistent in structure but have evolved in tone and emphasis—marking a pivot towards proportionality, responsiveness, and innovation.

Priority 1: Maintain and ensure the safety and soundness of the banking and insurance sectors and ensure continuing resilience. In 2024, the PRA’s priority was to “maintain and build on” the resilience of the banking and insurance sectors. In 2025, the regulator opts instead to “ensure” the safety and soundness—clearly an intentional shift away from language that implies regulatory layering, aligning with broader political signals to reduce regulatory friction and make the UK a more attractive investment destination.

Priority 2: Be at the forefront of identifying new and emerging risks, and developing international policy. This priority is unchanged in its wording, but the explanatory text provided by the PRA reflects a sharpened focus on technological transformation. Artificial intelligence, in particular, is now acknowledged as both a risk and a growth catalyst. The PRA’s growing interest in the intersection between innovation and resilience underscores a need for forward-looking, agile regulation.

Priority 3: Support competitive, dynamic and innovative markets, alongside facilitating international competitiveness and growth, in the sectors that we regulate. The inclusion of the word “innovative” in this year’s articulation of the PRA’s third priority is significant. It reflects the regulator’s growing willingness to facilitate—and indeed encourage—innovation, in the delivery of its competition and growth mandates. Furthermore, the shift from referring to itself in the third person (“the PRA”) to the first person (“we”) suggests a softer and more engaged regulatory tone.

Priority 4: Run an inclusive, efficient, and responsive regulator within the central bank. In 2025, the word ‘responsive’ has replaced ‘modern’ in the wording of the fourth priority. The PRA commits to improving its internal processes, including authorisation workflows and stakeholder engagement. This includes broader use of feedback loops such as annual firm surveys and roundtables. The regulator is evidently striving for a more inclusive and service-oriented operational model—again, consistent with its growth and competitiveness agenda.

Insurance-Specific Initiatives

Solvency UK: Accelerating innovation, and investment.  The focus is on embedding the new Solvency UK regime and on delivering the work recently started to establish a Matching Adjustment Investment Accelerator designed to further reduce barriers to investment by insurance firms, enabling them to deliver more quickly on their commitments to make additional investments in the UK and so support economic growth.

Growth in the bulk purchase annuity (BPA) market, including funded reinsurance (Funded Re). The PRA expects the BPA market to continue to grow rapidly and is concerned about the risks associated with that. In particular, it is concerned firms are not yet fully meeting the expectations of SS5/24 – Funded reinsurance which were published in July 2024. This will form part of the Life Insurance Stress Test being carried out in 2025.

Insurance Stress Testing. The Life Insurance Stress Test is now underway and results are expected to be published in Q4 2025. A General Insurance Stress Test will take place in 2026 with PRA communication on the planning expected to start in September 2025.

Insurance special purpose vehicles (ISPVs). ISPVs are very much seen as an opportunity to drive growth, albeit with the realisation that the actions delivered so far have not given the expected results. The commitment continues into 2025 and following consultation, the PRA intends to finalise changes to the UK framework for ISPVs targeted to:

• make it easier for a wider range of current global market practices to be undertaken in the UK;
• streamline and speed up the application and approval processes; and
• clarify the PRA’s expectations of UK insurers who cede risks to ISPVs, wherever they are established.

General insurance (GI)The PRA is concerned about the potential risk for certain product lines to move to less profitable phases in their market cycles. It has indicated it will be paying close attention to firms’ underwriting strategies and pricing actions, working closely with the Society of Lloyd’s to coordinate its oversight of Managing Agents. Firms that have a history of projecting overly optimistic underwriting profits in their business plans and internal models have been placed on notice they can expect some robust challenge from the PRA. The challenge will be for firms to know whether that description might apply to them and to ensure they are prepared for such conversations. Firms involved with the underwriting of cyber-related risks have also been singled out, not because of any perceived failings so much as a recognition that the size of the market and the levels of risk continue to evolve quickly.

Multi-sector work

Review of the current mutuals landscape in the UK. The government sees mutuals and cooperatives as an area with the potential to drive growth. In a letter dated November 2024 to the PRA, HM Treasury requested that the PRA provide feedback by the end of 2025 on what actions could be taken to facilitate this. The PRA appear to have placed this work as their top multi-sector priority, listing it first in the plan.

Ease of entry and exit. With the new Solvent Exit Planning rules for banks coming into effect on 1^st October 2025, insurance firms can expect to see further guidance and feedback as the PRA learns from that work, ahead of the implementation deadline of 30^th June 2026 for insurers. In the lead up to implementation the PRA has committed to updating its internal processes and providing support to firms as appropriate.

Implementation of the critical third party (CTP) regime. With the final rules set out back in November 2024, there has been a degree of speculation about which firms may be given Critical Third-Party designation. The PRA has confirmed that, alongside colleagues from the Bank and the FCA, they are actively reviewing which third party service providers might meet the criteria, with a view to then making the formal recommendation to HMT. The international nature of firms likely to be designated is now giving rise to some additional work coordinating activity with overseas regulators.

Operational risk and resilience. There are a few elements to this piece of work, but seemingly high on the list of regulatory concerns are the multi-year digital transformation programmes started by some firms. If your firm has started such work, you should ensure you have carefully assessed the risks from the perspective of your Op Res plans.

Cyber resilience. Not just an issue for general insurance firms underwriting cyber insurance, the PRA has wider concerns about the threats to firms’ operational resilience that derive from cyber threats. It sees cyber-related disruption to firms not just as a threat to their ability to meet the needs of their customers, but also as having the potential to affect wider financial stability. It has indicated it expects to start a new consultation in H2 2025 on expectations for the management of ICT and cyber resilience risks. This includes risks arising from IT transformations, and the sector’s ability to detect, withstand and recover from disruptions in the event of ICT and cyber incidents. This strategic work will help the sector achieve higher standards of operational and cyber resilience.

Implementing changes to the Senior Managers & Certification Regime (SM&CR). A joint consultation with the FCA is promised, with the aim of improving the clarity, efficiency, and proportionality of the regime. The PRA also commits to improve the process for senior manager approvals.

Climate change. Climate related risks remain a key concern for the PRA and it has promised to consult on an update to “SS3/19 – Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change” at some stage in 2025. No specific timeframe is given.

Operational Effectiveness at the PRA

The PRA recognises the value it can deliver by providing an efficient and streamlined service covering key tasks such as the processing of new firm authorisations, approvals of senior managers, changes in control and variations of permissions. It has committed to seeking further improvements in the way it manages these, with a specific focus on helping international firms navigate the UK regulatory authorisation process.

Conclusion: A Pragmatic Evolution in Regulatory Tone

The 2025/26 PRA Business Plan reflects a maturing regulatory framework that is seeking to better balance resilience with growth. While core priorities remain, the language has evolved—quietly but meaningfully. Subtle shifts in tone and emphasis point to a regulatory agenda that is more responsive, proportionate, and strategically aligned with national policy objectives. For regulated firms, the message is clear: innovation, international competitiveness, and engagement with the regulator will be rewarded—but not at the expense of operational resilience, robust governance, or financial soundness.