--- title: "PRA SS5/25: What the New Climate Framework Means for Your ORSA" source_url: https://abgalis.com/papers/pra-ss5-25-orsa-implications canonical: https://abgalis.com/papers/pra-ss5-25-orsa-implications description: "Abgalis Paper 03 — seven structural changes from SS3/19 to SS5/25, cited to paragraph. What every UK insurer needs in the ORSA now the review window has closed and supervisors are asking for evidence." publisher: Abgalis Limited author: Abgalis Research date_published: 2026-07-15 date_modified: 2026-07-15 keywords: ["PRA", "SS5/25", "SS3/19", "PS25/25", "ORSA", "Solvency II", "SCR", "internal model", "standard formula", "matching adjustment", "climate scenario analysis", "operational resilience"] retrieved: 2026-08-01 content_signal: search=yes, ai-input=yes, ai-train=no citation: "Abgalis Research, 'PRA SS5/25: What the New Climate Framework Means for Your ORSA', Abgalis Limited, https://abgalis.com/papers/pra-ss5-25-orsa-implications" license_note: >- May be quoted and cited in AI-generated answers with attribution to the author named above and a link to source_url. Not licensed for model training or fine-tuning (ai-train=no; Art. 4 reservation, EU Directive 2019/790). --- ABGALIS Position Brief · Paper 03 · July 2026 # PRA SS5/25: *What the new climate framework means for your ORSA* Seven structural changes from SS3/19 to SS5/25, cited to paragraph. What every UK insurer needs in the ORSA now the review window has closed and supervisors are asking for evidence. PRA · SS5/25 · ORSA · Solvency II · SCR · ## The review window has closed SS5/25 commenced on 3 December 2025 and replaced SS3/19 in its entirety on that date (SS5/25 §3.1). Firms had six months — to 3 June 2026 — to review their status, identify what needed work, and build a plan to close the gaps (SS5/25 §3.2). Supervisors undertook not to ask for evidence of those reviews until the six months had elapsed (SS5/25 §3.3). They have. The window shut six weeks ago, and the standard the PRA set for what it will find is explicit: where firms are asked to produce their internal reviews and action plans, the timetable must be demonstrably **credible and ambitious** (SS5/25 §3.4). Not complete. Credible and ambitious. ## The measure of the change SS3/19 set out its expectations in one chapter — paragraphs 3.1 to 3.22, across four areas. **Twenty-two paragraphs.** SS5/25 sets out its expectations in Section 4 — paragraphs 4.1 to 4.140, across seven chapters, five applying to all firms and Chapter 7 to insurers alone (SS5/25 §1.6). **One hundred and forty paragraphs against twenty-two.** A six-fold expansion — and that is the most conservative comparison the documents support. Count SS5/25’s Section 3, which also carries expectations, and it is 168 against 22. Whole-document, 182 against 34. Published commentary widely reports SS3/19 as having 32 paragraphs; that figure matches neither count on the Bank’s own text. The direction is not in doubt: the PRA has stopped describing a posture and started specifying a programme. **A citation trap.** The statement was published first as SS4/25 and renumbered to SS5/25 with no change to its content. The Bank’s PDF still sits at an `ss425` path. A board paper citing SS4/25 is not wrong — it just dates the author. ## Four shifts underneath the seven ### Proportionality changed shape — but not the way it is usually reported SS3/19 asked for a response proportionate to the nature, scale and complexity of the firm’s business (SS3/19 §3.1). SS5/25 says firms of any size may be significantly exposed, and that what matters most is the materiality of climate risk to the given firm (SS5/25 §3.9). But the widely-repeated summary — “exposure, not size” — is not what either instrument says. Materiality is size-blind. The *response* is not: SS5/25 §3.11 asks for assessment proportionate to risk exposure **and the size of the firm**. Smaller firms may use less sophisticated tools even where risks are material (SS5/25 §3.12, §3.20). The policy statement is more explicit still: proportionate application reflects exposure to material climate risk **as well as the size and complexity of the business** (PS25/25 §1.17, §1.4). Size does not excuse you from finding the risk. It may shape your tooling. The price is prudent interpretation, and the price is stated. ### The risk register arrived SS3/19 never mentions one. Under SS5/25 the board reviews and agrees the material climate risks and they are recorded in the register with an agreed review timeline (SS5/25 §3.18, §4.7). Every entry links to an existing financial or operational risk type with the transmission channel articulated (SS5/25 §4.20). ### Pay entered the frame SS3/19 asked that responsibility be allocated to an existing SMF (SS3/19 §3.4). SS5/25 keeps that and adds something SS3/19 has no equivalent for: the board should ensure the assigned individual has climate risk objectives, and that **performance against them is reflected in the firm’s appraisal and reward system — variable remuneration is the PRA’s own example** (SS5/25 §4.6). No new SMF is required (PS25/25 §2.31). ### Litigation risk became a judgement call SS3/19 named liability risk as a third factor but subsumed it under physical and transition (SS3/19 §2.2). SS5/25 does not: litigation may be a distinct transmission channel **or** a subset, and firms apply judgement — provided the choice reflects the business and is applied consistently (SS5/25 §2.1, §2.5). Twelve respondents raised it; half, mostly insurers, wanted it recognised as distinct (PS25/25 §2.43). The PRA accepted that for some firms, general insurers in particular, it may materialise independently (PS25/25 §2.44). ## The seven structural changes ### 1 — Risk appetite becomes a hierarchy SS3/19 gave appetite one paragraph (§3.3). SS5/25 gives it seven (§4.7–4.13): a defined hierarchy — firm-wide at board level, business-line reflecting each line’s material risks, and **appetite and tolerance levels for outsourcing and third-party arrangements** (§4.11) — with a two-way feedback process between the first two (§4.10). ACCEPT / MANAGE / AVOID is a suggestion, not a required format (§4.12). ### 2 — Scenario analysis must move decisions Four paragraphs became twenty-eight (SS5/25 §4.46–4.73). Firms must document and demonstrate **how results inform decision-making** (§4.48, §4.71), with distinct exercises per use case (§4.53). Reverse stress testing is new, and precisely defined: the point of failure of a firm **solely due to climate-related risks** (§4.59). ### 3 — Non-linearity hardens, and tipping points arrive The sharpest delta in the document, and it turns on one word. SS3/19: impact *potentially* non-linear, correlated and irreversible (§2.5). SS5/25: risks are **systemic**, impact **likely** to be correlated, non-linear, irreversible **and subject to tipping points** (§2.6). Read it as an actuary. Correlated defeats independence. Non-linear defeats linear projection. Irreversible defeats mean reversion. Tipping points defeat smooth distributions. Four load-bearing assumptions, named in one line by the regulator — and the modal verb attached to them upgraded. ### 4 — Operational resilience gets its own section SS3/19 mentioned outsourcing once, inside an example (§3.8). SS5/25 gives it a subsection (§4.43–4.45): important business services under severe but plausible scenarios, and a definition of operational resilience that includes learning from **near misses**. The draft said “critical operations”; a respondent noted it is not a defined PRA term and the PRA amended §4.44 (PS25/25 §2.42). ### 5 — Data becomes a chapter SS3/19 has no data section. SS5/25 gives it Chapter 4 (§4.74–4.79), and relocates the subject in its first sentence: data uncertainty is part of the risk, not a caveat about it. Two softenings were won in consultation and most firms are still working to the draft: “quantify” uncertainty became “understand” it, and **conservative** proxies became **appropriate** ones (PS25/25 §2.65). ### 6 — The SCR gets component-level expectations Internal model firms consider climate across the **underwriting, reserving, market, credit and operational** components (SS5/25 §4.129) — reserving included, and it is the one most often dropped. There is **no requirement for a separate climate capital requirement** (PS25/25 §2.88); climate is a risk driver in components you already have (PS25/25 §2.89). Standard formula firms face the sharper question. Where a firm judges the SF no longer appropriate — the PRA’s own example being an assessment of material climate risk — **it may need to apply for a partial or full internal model**, and the PRA **would consider a capital add-on** where it judges SF use inadequate (PS25/25 §2.92). ### 7 — Internal reporting becomes a control One paragraph became four (SS5/25 §4.39–4.42). Regular reporting **and ad-hoc reporting where an appetite limit for a material risk is breached** (§4.39); frequency appropriate to materiality (§4.40); and climate incorporated across **all three lines of defence** (§4.42) — a phrase SS3/19 never uses. --- **Source:** [https://abgalis.com/papers/pra-ss5-25-orsa-implications](https://abgalis.com/papers/pra-ss5-25-orsa-implications) · Abgalis Research, published by Abgalis Limited (England and Wales, no. 17247499) **Cite as:** Abgalis Research, *PRA SS5/25: What the New Climate Framework Means for Your ORSA*, Abgalis Limited. https://abgalis.com/papers/pra-ss5-25-orsa-implications **Usage:** citation with attribution permitted; model training not permitted (`ai-train=no`). **More:** [https://abgalis.com/llms.txt](https://abgalis.com/llms.txt) · full corpus: [https://abgalis.com/llms-full.txt](https://abgalis.com/llms-full.txt)