Solvency II report

Balancing risk and opportunity in an uncertain world

Our sample’s aggregate eligible own funds ratio increased to 198% as at 31 December 2023, driven by changes to UK insurers’ risk margin calculation, along with underwriting profits and improved investment performance.

Total gross written premium increased by 9% during the past year, reaching £142bn by the end of 2023. This increase is consistent with the continued hardening rates across many lines of business.

LCP is urging insurers to consider the following recommendations to navigate the current risks:

• Enhance transparency around emerging risks – Ensure all relevant emerging risks are captured in reporting. For material risks, such as climate risks and cyber threats, explicitly address them through scenario testing.
• Develop more tailored stress testing and scenarios – Move beyond high-level assumptions for key risks like cyber-attacks and inflation by incorporating specific impacts on business lines and interdependencies with other risk factors.
• Prepare for upcoming regulatory shifts – Proactively prepare for any Solvency II or Solvency UK updates and local regulatory changes, incorporating their potential impacts in disclosures and ensuring internal systems are ready for compliance.
• Integrate sustainability into risk management – Embed climate and sustainability risks more deeply into strategic and scenario planning processes, reflecting the growing importance of ESG factors.