The Reinsurance Advisory Board of Insurance Europe has issued a report (the Report) on the impact of using internal models for calculating the regulatory solvency capital requirement of reinsurers. The use of internal models has been an issue of debate recently and in its report Insurance Europe indicates that prescriptive approaches and formulas are in many cases not appropriate for reinsurers and that internal models can measure risk factors more appropriately in relation to particular exposure. The Report also responds to some of the supervisory criticisms made against internal models. The Report analyses the history and experience of the use of internal models by reinsurers to date, the prudential benefits of using internal models and looks at the future of internal model use.
A link to the Report is here.