PRA launched a consultation paper (CP27/17) that proposes updated expectations of firms in respect of the model change process set out in the Supervisory Statement SS12/16 titled “Solvency II: Changes to internal models used by UK insurance firms” and internal model change policies set out in SS17/16 titled “Solvency II: internal models – assessment, model change and the role of non-executive directors.” CP27/17 also proposes a process for quarterly model change reporting. The consultation closes on March 20, 2018. PRA also published a statement setting out its review of the time taken to assess model change applications approved since the implementation of Solvency II on January 01, 2016; how firms had completed the Common Application Package (CAP) when making model change applications; and how firms have defined model changes in model change policies.
PRA has developed the proposals in CP27/17 as part of its work on adjustments to the insurance prudential framework, in the light of experience following the introduction of Solvency II in the United Kingdom. This includes a series of improvements that support PRA’s commitment to the Treasury Select Committee. The proposals aim to reduce the burden on firms and to make better use of supervisory resources in pursuit of PRA objectives. CP27/17 is relevant to all UK Solvency II firms, the Society of Lloyd’s, and its managing agents. It is most relevant to firms that have an internal model approval. It may also be of interest to UK Solvency II firms seeking approval to use an internal model and to UK Solvency II firms that are part of the European Economic Area (EEA) or non-EEA groups with a group internal model.
PRA proposes that the updated guidance on the model change process and model change policies would be implemented in the second quarter of 2018. PRA considers that the proposed change to the model change process would result in the need for firms to modify their model change policies. Changes to the model change policy are subject to supervisory approval, following the procedure set out in paragraph 2.14 of SS12/16. PRA proposes that the changes in relation to minor model change reporting would take effect from June 2018.
Comment Due Date: March 20, 2018
Keywords: Europe, UK, Insurance, Solvency II, Internal Models, CP27/17, PRA
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