Overview
For years, solvent exit planning was often viewed as something relevant only to firms in distress. The Prudential Regulation Authority's (PRA) new regime fundamentally changes that perspective. Solvent exit planning is no longer an emergency contingency to be considered when options are already narrowing. It is now a core element of prudent risk management and governance.
As of 30 June 2026, in-scope insurers were required to have prepared and documented a Solvent Exit Analysis (SEA) in line with PRA Supervisory Statement SS11/24. The implementation deadline has now passed. Yet insurers should not view this as the end of a compliance project. If anything, it marks the beginning of a new phase of regulatory scrutiny, board accountability and ongoing operational readiness.
The key question for boards is increasingly straightforward:
If the PRA asked to see your solvent exit planning tomorrow, would it demonstrate a credible and executable route to market exit, or simply describe one?
Solvent exit planning – a quick recap
At its core, SS11/24 requires insurers to prepare and maintain a Solvent Exit Analysis (SEA), setting out how the insurer could achieve an orderly and solvent withdrawal from the market should that become necessary. The analysis should identify credible exit options, the circumstances that might trigger consideration of a solvent exit, and the operational, legal, financial and governance challenges that could affect execution. It should also consider the resources required (both financial and non-financial), key stakeholder communications and the insurer's approach to oversight, review and assurance.
The PRA's expectation extends beyond documenting potential exit routes. Insurers are expected to demonstrate that they have considered whether those routes are genuinely achievable in practice, including understanding barriers, dependencies, decision points and implementation requirements.
In simple terms, insurers should be able to answer three questions:
- How would we exit the market in a solvent and orderly manner?
- What could prevent us from doing so?
- Are we confident we could execute that plan if required?
Those questions may appear straightforward, but many insurers have found that assessing them properly requires a far deeper review of governance, operations, outsourcing arrangements and strategic options than initially anticipated.
Why solvent exit planning matters?
Historically, financial services regulators have focused heavily on recovery planning, ensuring that firms have appropriate measures available to restore financial resilience and avoid failure.
The PRA's solvent exit planning framework recognises that recovery is not always achievable, desirable or in policyholders' best interests. There may be circumstances where an orderly and solvent withdrawal from the market represents the most appropriate strategic option.
The regulator's objective is not to encourage insurers to exit. Rather, it is to ensure insurers can do so in an organised and controlled manner without causing unnecessary harm to policyholders, markets or wider financial stability. Importantly, solvent exit planning is intended to preserve strategic optionality. Insurers that consider exit planning early are generally better positioned to:
- Protect policyholders;
- Preserve value;
- Maintain operational continuity;
- Reduce execution risk;
- Support orderly restructuring activities; and
- Demonstrate strong governance and risk management.
The PRA has therefore made clear that solvent exit planning should form part of an insurer's broader risk management framework, rather than exist as a standalone compliance exercise.
Why the June 2026 deadline was never the main event?
Many insurers understandably focused on achieving compliance by 30 June 2026. However, the implementation date was arguably less significant than what follows. The PRA's concern is not whether an insurer has produced a document. The regulator's focus is whether that document demonstrates genuine preparedness. This distinction matters.
An insurer may have created a comprehensive SEA that describes possible exit routes. Yet if barriers, dependencies, governance challenges and execution issues have not been properly evaluated, the document may offer limited practical value when subjected to supervisory scrutiny. Our analysis highlights four themes that are likely to attract particular attention:
1. Supervisory credibility
The PRA will understandably distinguish between insurers that have completed a genuine strategic assessment and those that have approached compliance as a documentation exercise. A credible SEA should demonstrate that key assumptions have been challenged and ownership clearly established.
2. Hidden dependencies
Many insurers rely on extensive outsourcing arrangements, technology providers, administrators, claims handlers and other third parties. These relationships can significantly influence solvent exit options. In many cases, insurers discover that contractual provisions, operational arrangements or service dependencies restrict their ability to execute a particular exit strategy effectively.
3. Execution under stress
A solvent exit is unlikely to occur in ideal circumstances. Management teams may already be operating under strategic, financial or operational pressure when exit options are being considered. Run-off arrangements, sales and Part VII transfers can take considerable time to implement. Weak governance, poor-quality management information or unclear accountabilities can therefore become material execution risks.
4. Value and stakeholder protection
Perhaps most importantly, proactive planning protects optionality. The earlier potential exit scenarios are considered, the more strategic choices remain available. Late action can reduce flexibility, erode value and increase disruption for policyholders, counterparties, employees and other stakeholders.
What should insurers be doing now?
The most effective Boards are unlikely to view June 2026 as a completion date. Instead, they should regard it as the point at which ongoing maintenance and testing begins. Key priorities for insurers should be:
1. Reassess the SEA critically
Boards should challenge whether the current SEA would withstand detailed PRA supervisory review. Key questions to ask:
- Are assumptions still valid?
- Have material business changes occurred since drafting?
- Are exit options genuinely executable?
- Have key risks been properly assessed?
- Is ownership clearly defined?
2. Test governance and escalation arrangements
Many plans appear robust on paper but become less clear when management teams are required to make decisions under pressure. Insurers should test:
- Escalation processes;
- Board decision-making pathways;
- Trigger monitoring arrangements; and
- Regulatory engagement protocols.
3. Review operational readiness
Boards should ensure operational considerations receive the same attention as capital planning. Areas warranting detailed review may include:
- Outsourcing arrangements;
- Critical supplier contracts;
- Data accessibility;
- Technology platforms;
- Personnel dependencies; and
- Service continuity arrangements.
4. Address identified barriers
Where the SEA has identified weaknesses or execution challenges, insurers should develop remediation plans. An identified barrier that remains unresolved for several years may be difficult to defend during future supervisory discussions.
5. Conduct fire drills and scenario
Testing One of the most effective ways to evaluate readiness is through structured scenario testing. A "solvent-exit fire drill" can help insurers assess:
- Decision-making effectiveness;
- Information availability;
- Governance capability;
- Stakeholder management; and
- Practical execution challenges.
The insights generated often reveal issues that would not emerge through document review alone.
6. Maintain ongoing review
SS11/24 creates an ongoing obligation to evaluate and update the SEA. Changes to business strategy, ownership, operating models, outsourcing arrangements or financial position should prompt reassessment and consideration for update.
Looking ahead: What might the PRA do next?
Although supervisory approaches may vary, insurers should reasonably anticipate increased PRA regulatory engagement following implementation in the coming months. Potential areas of focus may include:
- Review and challenge of submitted or maintained SEAs;
- Assessment of operational and execution readiness;
- Thematic supervisory activity;
- Governance and board oversight reviews; and
- Requests for more detailed Solvent Exit Execution Plans (SEEPs) where appropriate.
Boards should therefore be prepared not only to provide documentation but also to explain and defend the thinking that underpins it.
Conclusion
Solvent exit planning represents an important shift in the PRA's expectations of insurers. The requirement is no longer about whether an insurer can produce a regulatory document. It is about whether the Board genuinely understands how the business could execute an orderly and solvent market exit if circumstances required it. Now that the 30 June 2026 deadline has passed, insurers should expect increasing focus on credibility, operational readiness and evidence of ongoing review.
The most successful insurers will be those that move beyond compliance and treat solvent exit planning as a living component of their governance, risk management and strategic planning frameworks.
The challenge for Boards is simple: if a solvent exit became necessary tomorrow, could the organisation execute its chosen strategy with confidence? If there is any doubt, now is the time to act.
