UK insurers urge Bank of England to rethink dynamic stress test

The British insurance industry is calling on the Bank of England’s Prudential Regulation Authority (PRA) to reconsider its new ‘dynamic’ stress test, known as DyGIST. Following a three-week simulation in May, industry representatives argued that the exercise placed excessive pressure on firms and utilized unrealistic scenarios.

Unlike traditional stress tests that use predefined shocks, DyGIST required insurers to respond in real time to unfolding crises, including a U.S. West Coast earthquake, a Gulf of Mexico hurricane, a UK windstorm, European floods, and a cyber event. The International Underwriting Association noted that the rapid accumulation of these scenarios was “very unlikely” and warned that regular testing of this nature could be “overly burdensome.”

Industry sources reported that the simulation forced some firms to cancel staff leave and hire technical experts at short notice to meet heavy reporting demands. The DyGIST exercise involved firms representing 80% of the UK general insurance market.