Update 13 July 2018
This supervisory statement (SS) was updated following publication of Policy Statement (PS) 19/18 ‘Solvency II: Internal models – modelling of the matching adjustment’ and PS20/18 ‘Solvency II: Internal models update’. It was updated to reflect expectations of firms in respect to the model change process. The details of the updates can be found in the Annex to the updated SS.
Published on 25 November 2016
This supervisory statement (SS) is addressed to all UK firms that fall within the scope of Solvency II (‘the Directive’), and to Lloyd’s. It sets out the Prudential Regulation Authority’s (PRA’s) expectations of firms regarding internal models.
This statement should be read in conjunction with the PRA’s rules in the Solvency II Sector of the PRA Rulebook, the Solvency 2 Regulations 2015 (2015/575) and the PRA’s approach to insurance supervision document.
In this SS, the PRA sets out its expectations for firms in the following areas:
- internal model applications;
- the assessment of credit risk;
- dealing with variability in premium provisions;
- the effect of stresses on the volatility adjustment;
- the role of non-executive directors;
- model justification and validation and the role of boards;
- the PRA’s use of quantitative analysis in approving models; and
- scope, identification and classification, governance and reporting of internal model changes.
Date of publication
|13 July 2018|| Supervisory Statement 17/16 UPDATE - July 2018
||Updated following PS20/18 ‘Solvency II: Internal models update’ and PS19/18 ‘Solvency II: Internal models – modelling of the matching adjustment
||13 July 2018|
|25 November 2016|| Supervisory Statement 17/16 - November 2016
||Updated by 13 July 2018 version|