10 priorities for the bulk purchase annuity (BPA) market in 2026: Breaking down the PRA’s latest Dear CEO letter

12 February 2026

3 minute read

On 15 January 2026, the Prudential Regulation Authority (PRA) issued a “Dear CEO” letter setting out the 2026 supervisory priorities for insurers. With the bulk purchase annuity (BPA) market expected to continue expanding at record pace, the PRA is sharpening its focus on risk management, long‑term resilience, and responsible innovation.

We’ve broken down the update into 10 key areas.

1 – MAIA (Matching Adjustment Investment Accelerator)

Last year, the PRA launched MAIA, which allows firms (once approved) to invest in new asset types immediately under the Matching Adjustment rules. This expands investment flexibility into a range of highly predictable (HP) cashflow assets.

Some firms plan to submit MAIA applications early this year. The PRA will be reviewing these for the first time and assessing the governance and risk management behind the MAIA assets.

2 – Funded Re

In BPA, Funded Re involves passing part of the premium to a reinsurer, who then pays the pension benefits. It helps insurers manage the underlying risks of the business but introduces material counterparty, collateral and investment risks.

After the industry roundtable in September 2025 (where they confirmed policy action is needed), the PRA plans to give an update in Q2. This could include clearer rules, or even restrictions on how much Funded Re insurers can use and what structures are acceptable.

3 – Liquidity reporting

A new mandatory liquidity reporting requirement goes live on 30 September 2026. This comes after the lessons learned from COVID‑19 and the 2022 Liability Driven Investment (LDI) crisis.

The PRA will continue engaging with firms ahead of the implementation date. They want to refine expectations and ensure insurers can demonstrate strong liquidity planning in stressed conditions.

4 – Private credit

Private markets now play a major role in BPA asset strategies, but how these assets can hold up in a long economic downturn is still largely untested.

The Bank of England is launching the System‑Wide Exploratory Scenario (SWES) this year to understand what might happen to private capital flows under stress, and how that could affect UK financial stability, by seeking insights from BPA insurers and other market participants.

5 – SEA (Solvent Exit Analysis)

By 30 June 2026, insurers must prepare a SEA – a plan for how they would exit the market in an orderly way while keeping policyholders fully protected.

The PRA will be reviewing insurers’ submissions of SEAs to assess whether these plans are credible, practical, and detailed enough. The submission should include financial and non-financial considerations.

6 – LIST (Life Insurance Stress Test)

In late 2025, the PRA published the LIST results with the 11 largest UK life insurers. This assesses how life insurers would hold up in a severe market stress.

PRA will use the LIST results to influence firm‑specific supervision and gather feedback on how future LIST exercises should be run. We may also see more clarity on disclosures.

7 – Captive regime

The UK is developing a new regulatory framework for captives, due in 2027, to support the sector to grow and deliver wider economic benefits.

The PRA intends to develop the regime this year and consult in Summer 2026. This will be key to shaping how captives can operate and launch the new regime in 2027.

8 – AI

The PRA is supportive of insurers using AI to innovate (e.g. in pricing, data and operations), but only if firms can show strong governance, proper controls, and senior management understanding.

The PRA wants to balance innovation with safety. Expect more emphasis on model risk management, data quality, oversight of third‑party AI vendors, and cyber resilience.

9 – Alternative life capital options

With BPA business booming, the sector is naturally attracting new forms of long‑term capital.

The PRA wants to hear from industry about how alternative capital can enter the market safely. Their aim is to support UK growth, but not at the expense of policyholder protection or the long‑term nature of annuity liabilities.

10 – STTR (Solvency-triggered termination rights)

STTR clauses allow a pension sponsor or trustee to terminate the BPA contract if the insurer’s solvency drops below a set trigger. These clauses have become more common, but they pose real risks to BPA insurers if triggered during market stress.

The PRA will review how firms responded to last year’s “Dear CEO” STTR-related letter and assess whether BPA writers have improved their risk management, pricing discipline, and governance around these clauses.