The Bank of England has published an article by members of the PRA’s Policy Division on the role of business model analysis (BMA) in the supervision of insurers. This is in the “Topical Articles” section of the Quarterly Bulletin. The PRA uses BMA as part
of its judgement based, forward-looking supervisory approach, to help to understand the future as well as current risks that may threaten the ongoing viability of an insurer’s operations. The PRA’s capital requirements aim to make insurers resilient against
short-term shocks, but to be confident that insurers will remain viable over the longer term, the PRA needs to analyse the risks of an insurer’s particular business model, in order to determine whether an insurer’s profits are sustainable.