PRA publishes internal model guidance: PRA has issued guidance on formulating internal model change policy under Solvency 2. The PRA guidance covers:

  • the scope of any internal model change policy;
  • how firms might ensure they identify when a change to the internal model is necessary;
  • how firms should go about meeting the requirement in EIOPA guidelines to classify major changes to their internal model;
  • how a series of minor model changes might constitute a major internal model change;
  • what governance structures should be in place to cover the internal model change policy of a firm;
  • reporting of model changes to PRA; and
  • the need to review the internal model change policy regularly.

(Source: PRA: Internal Model Change Policy)

PRA publishes H1 stress scenario details: PRA has updated firms subject to the fourth Capital Requirements Directive (CRD4) on how to use the H1 2015 stress scenario and concurrent scenario. Firms should use these as a starting point for building and calibrating their own scenario under Pillar 2. PRA wants to encourage:

  • senior management engagement and awareness;
  • firms not to forget the potential for "tail risks" to crystallise, when the economy is stable; and
  • a system that will allow supervisors to benchmark results and approaches to stress testing.

The update notes also the relevance of the tests to insurers. (Source: PRA Publishes H1 Stress Scenario Details)