Recent market conditions, including the weakening of the U.S. dollar in early 2025, have increased uncertainty in global financial markets. Since January 2025, the dollar had fallen approximately 7% relative to the pound as of late April 2026. A combination of tariffs, ongoing conflicts involving the United States, Israel, and Iran, and higher gas and oil prices contributed to this trend. As a result, foreign exchange (FX) volatility has increased and introduced additional risks to several key insurance business functions, including reserving, pricing, capital, financial reporting and business planning. However, the impact on overall profit-and-loss accounts and solvency position has so far remained modest.
This paper builds on Milliman’s white paper, “Managing through economic uncertainty: How to handle foreign currency volatility for (re)insurers,” and presents consolidated high-level insights from a survey of UK and European insurance groups. Key stakeholders included chief actuaries and chief risk officers. From a top-down perspective, the survey highlights prevailing practices, common challenges, and actionable recommendations, focusing on how proportionate FX risk management can increase business resilience and support future strategic ambitions.
The paper includes the following key observations.
- Balance sheet and regulatory capital requirements: Given established asset-liability management techniques and hedging practices such as forwards and swaps, the FX impact on capital requirements has not been and is not expected to be material.
- Reserving: Most noted FX volatility did not materially impact reserving approach.
- Other key business functions: More than half of respondents noted FX volatility has not resulted in material changes to business planning, pricing, or underwriting strategy.
- Risk management framework and board reporting: Governance of FX risk varies by organisation, but regular monitoring and board-level visibility are relatively common.
- Further considerations: We consider the impact if the U.S. dollar were to deteriorate significantly over the next 12–24 months.
- Next steps: What organisations should do to support proactive risk management and maintain readiness for potential extreme FX volatility.