Abstract
Abstract Solvency II requires that firms with Internal Models derive the Solvency Capital Requirement directly from the probability distribution forecast generated by the Internal Model. A number of UK insurance undertakings do this via an aggregation model consisting of proxy models and a copula. Since 2016 there have been a number of industry surveys on the application of these models, with the 2019 Prudential Regulation Authority (“PRA”) led industry wide thematic review identifying a number of areas of enhancement. This concluded that there was currently no uniform best practice. While there have been many competing priorities for insurers since 2019, the Working Party expects that firms will have either already made changes to their proxy modelling approach in light of the PRA survey, or will have plans to do so in the coming years. This paper takes the PRA feedback into account and explores potential approaches to calibration and validation, taking into consideration the different heavy models used within the industry and relative materiality of business lines.
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
