In April, the United Kingdom’s Prudential Regulation Authority (PRA) launched ‘CP10/25’, its consultation paper on managing climate-related risks, which will update the supervisory statement 3/19 (SS3/19). CP10/25 consolidates current supervisory thinking and offers a potential benchmark for climate risk management practices. The document sets expectations for climate scenario analysis. This article, published in the June 2025 issue of The European Actuary, presents an overview of the PRA’s new guidance.
Among its key recommendations, the PRA advises firms to:
- Appropriately document how their climate scenario analysis fulfils their objectives and informs decision-making
- Select, match and tailor scenarios to fit objectives and specific use cases, including relevant jurisdictional climate targets
- Regularly review and update scenarios to reflect modelling and scientific advancements, and the evolving risks to the firm