The PRA has published Supervisory Statement SS 5/14: Solvency II: calculation of technical provisions and the use of internal models for general insurers. The aim of the Statement is to set out the PRA’s expectations in relation to the firms’ preparations towards Solvency II compliance by ensuring that general insurers are setting an adequate level of technical provisions and hold sufficient capital. The Statement covers:
- technical provisions – realistic assumption and adequate methods including the risk margin and events not in data (ENID); and
- internal models – material risks (including ENID), consistency of with technical provisions, assumptions and techniques, data, risk mitigation, management actions, validation standards, external models and data and data from third party models.