Earlier this week I published a Substack on the PRA’s LIST 2025 life insurance stress test for UK annuity writers, link in the comments.

The PRA applies a severe but plausible market and credit shock, roughly a one in one hundred style event, and still finds that all firms remain above their capital requirements, with aggregate solvency coverage falling 31% points after stress. That is a meaningful hit, but it is not a solvency scare.

When I speak to institutional investors, the biggest concern around UK life insurers is a credit or broader asset event. Recently that has meant worries about leveraged gilts or private credit, and previously it was commercial property or equity release mortgages that sat at the top of the worry list.

What makes LIST 2025 interesting is that we now have the regulator’s view on exactly that risk. The PRA is independent and tough, its job is to challenge these balance sheets, not to reassure equity holders. Yet the conclusion of this exercise is that even in an unlikely but severe scenario, the sector remains sound.

At the same time, the main listed UK life insurers still trade on very high dividend yields, from 5.8% for Aviva up to 9.1% for Legal & General, with the others sitting in between, which is more than double the FTSE 100 average of 3.2%, and the FTSE 350 Life Insurance index has not reacted positively to the LIST 2025 release.

So I am genuinely curious:

• What is the market waiting for

• Which risks does the market still think are underpriced

• Why is a tough regulatory stress test on asset risk not more reassuring for valuations

Not investment advice.

#insurers #FTSE #PRA