--- title: "PRA SS5/25 climate-risk supervisory expectations" source_url: https://abgalis.com/topics/pra-ss319-climate-implementation canonical: https://abgalis.com/topics/pra-ss319-climate-implementation description: "Practitioner guide to PRA SS5/25 implementation for UK insurers — four pillars, capability over compliance, and common 2026 shortfalls." publisher: Abgalis Limited author: Abgalis Research date_published: 2026-05-08 date_modified: 2026-05-08 keywords: ["PRA SS5/25", "climate risk", "UK insurers", "Bank of England", "ORSA", "scenario analysis"] retrieved: 2026-08-01 content_signal: search=yes, ai-input=yes, ai-train=no citation: "Abgalis Research, 'PRA SS5/25 climate-risk supervisory expectations', Abgalis Limited, https://abgalis.com/topics/pra-ss319-climate-implementation" 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 Topic Briefing · UK Prudential # PRA SS5/25: *climate-risk supervisory expectations* A practitioner guide for UK insurers — what the PRA expects to see in 2026, the four pillars, and where insurers most often fall short of capability-over-compliance. PRA · SS5/25 · UK · Climate · ## What SS5/25 actually requires Supervisory Statement 3/19 — published April 2019, refreshed through subsequent Dear-CEO letters and the climate biennial exploratory exercise commentary — sets the PRA's expectations for managing the financial risks from climate change in the banking and insurance sectors. It rests on four pillars: 1. **Governance** — clear board ownership, named senior-management responsibility, climate built into the firm's risk-management framework. 2. **Risk management** — climate risk identified, measured, monitored, and managed across the firm's existing risk taxonomy (insurance, market, credit, operational). 3. **Scenario analysis** — forward-looking quantitative scenarios used in business planning and capital adequacy assessment, with both physical and transition framings. 4. **Disclosure** — public disclosure consistent with TCFD recommendations (now ISSB IFRS S1/S2 in the UK adoption pathway). ## From "we comply" to "we can demonstrate" The first cycle of SS5/25 evidence was largely narrative. The current cycle is not. Supervisors expect to see the modelling itself — the data, the calibration, the stress, the back-testing, the governance and the use in decisions. The ORSA section on climate-risk integration should now contain a worked example of a specific climate stress traced through the capital model, not just a statement that climate has been considered. The shift is from *compliance* (we have a policy) to *capability* (we can run the question in real time, including questions the supervisor invents on the day). ### Diagnostic question If the PRA asked tomorrow for a 90-day SCR projection under the firm's worst-case physical climate scenario combined with a 30% transition-asset re-pricing, with management actions tested at three time horizons — could the firm produce it within two weeks? If not, the SS5/25 evidence base is narrative, not capability. ## Where insurers most often fall short - **Generic scenarios.** Off-the-shelf NGFS scenarios reproduced verbatim. Firm-specific scenarios that combine the firm's actual exposures are increasingly the standard. - **Bolt-on climate.** Climate risk lives in a separate workstream that doesn't connect to capital, underwriting, reinsurance or operational decisions. - **Missing the regulatory channel.** Climate risk is treated as an insurance loss. The supervisory consequences (additional disclosure burden, capital add-ons, prudential restrictions) aren't modelled at all. - **Cat-model opacity.** Vendor cat models are run as black boxes without SS1/23-style validation, with no explanation of how climate-conditioned versions differ from base versions. - **Disclosure–prudential mismatch.** The TCFD/ISSB disclosure asserts climate is material; the ORSA quietly treats it as immaterial. The supervisor reads both. ## The Abgalis approach The **Abgalis Engine** treats climate as one of seven domains in a cross-domain transmission framework. SS5/25 evidence isn't a separate workstream — it's a view onto the same channel architecture used for capital, underwriting and disclosure. That makes the worked example the supervisor wants to see a configuration choice, not a build-from-scratch exercise. Specifically: a firm-specific climate scenario, traced with explicit channel latency through the market, credit, liquidity, insurance, operational, and strategic & emerging domains, with management actions tested in time-indexed steps. Output is consumed by the SCR, the reverse-stress test, the operational-resilience evidence under DORA Article 25, and the disclosure narrative — all from the same model. --- **Source:** [https://abgalis.com/topics/pra-ss319-climate-implementation](https://abgalis.com/topics/pra-ss319-climate-implementation) · Abgalis Research, published by Abgalis Limited (England and Wales, no. 17247499) **Cite as:** Abgalis Research, *PRA SS5/25 climate-risk supervisory expectations*, Abgalis Limited. https://abgalis.com/topics/pra-ss319-climate-implementation **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)