10

Use Test

10.1

A firm must demonstrate to the PRA that its internal model is widely used, and plays an important role in its system of governance (referred to in Conditions Governing Business 27, Insurance - Fitness and Propriety 2.1 to 2.3, 4.1, 4.3 and 4.4 and Insurance – Allocation of Responsibilities 4) and particularly in its:

  1. (1) risk-management system, as set out in Conditions Governing Business 3.1 to 3.7, and decision-making processes; and
  2. (2) economic and solvency capital assessment and allocation processes, including its ORSA, as set out in Conditions Governing Business 3.8 to 3.11.

[Note: Art. 120 of the Solvency II Directive]

10.2

A firm must also demonstrate to the PRA that the frequency of calculation of its SCR using the internal model is consistent with the frequency with which it uses its internal model for the purposes set out in 10.1.

[Note: Art. 120 of the Solvency II Directive]

10.3

A firm must ensure the ongoing appropriateness of the design and operations of its internal model, and that the internal model continues to appropriately reflect the risk profile of the firm.

[Note: Art. 120 of the Solvency II Directive]