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Application provision

1.1 Unless otherwise stated, this Part applies to:

  1. (1) a UK Solvency II firm; and
  2. (2) in accordance with Insurance General Application 3, the Society.

14.1

01/01/2016

  1. (1) A firm must have in place a regular cycle of internal model validation which includes:
    1. (a) monitoring the performance of the internal model, reviewing the ongoing appropriateness of its specification and testing its results against experience;
    2. (b) an effective statistical process for validating the internal model which enables the firm to demonstrate to the PRA that the resulting capital requirements are appropriate;
    3. (c) an analysis of the stability of the internal model and, in particular, the testing of the sensitivity of the results of the internal model to changes in key underlying assumptions; and
    4. (d) an assessment of the accuracy, completeness and appropriateness of the data used by the internal model.
  2. (2) The statistical methods applied for the purposes of (1)(b) must test the appropriateness of the probability distribution forecast compared to loss experience, all material new data and information relating thereto.

Additional Notes


[Note: Art. 124 of the Solvency II Directive]