Life insurers Aviva PLC (LSE:AV.), Legal & General Group PLC (LSE:LGEN), M&G PLC (LSE:MNG) and Phoenix Group Holdings PLC (LSE:PHNX) are among the firms that are being individually stress-tested by the Bank of England, with results to be published this autumn.
These are the first firm-level results from a new life insurance stress test as part of the BoE's Life Insurance Stress-Testing (LIST) programme – a regulatory exercise designed to assess the resilience of the UK’s largest bulk annuity providers under severe market and credit conditions.
The test focuses on the solo entities of the biggest life insurers active in the bulk purchase annuity (BPA) space, including Aviva, L&G, Phoenix and M&G.
Unlike previous exercises, the 2025 iteration will provide partial firm-level disclosure, limited to a "Core Scenario" (Part A), while two exploratory scenarios (Parts B and C) will only be reported at the sector level.
The core stress will unfold in three stages: a market shock featuring falling rates and widening credit spreads; a second phase of property value declines and asset downgrades; and a final stage of market stabilisation, incorporating assumed management actions.
The Bank has said the calibration will resemble the global financial crisis for market moves, but will be tougher on credit and property.
Results for the sector will be released on 17 November, with firm-level disclosures to follow on 24 November. These will include changes in solvency capital, own funds, and Matching Adjustment portfolio breakdowns.
Analysts at UBS said they expect stage one to be relatively benign, but warn that credit downgrades in stage two could significantly erode solvency.
UBS noted the test should offer “valuable insights into the solo-entity balance sheet resilience” of major insurers.