Insurance market update – August 2011
The Deloitte view for life insurers
Insurers seeking approval to use an internal model to calculate their capital requirements, as a part of the Solvency II Directive, will have to demonstrate that they have had their internal model ‘independently validated’. This is one of the six key tests required for model approval. An internal model under Solvency II is much wider than just a calculation engine. It also covers aspects such as system governance, data, technology and culture. Hence, internal model validation extends beyond a quantitative review of capital requirements.
In this edition we consider the areas of an internal model requiring validation, the tools needed to do so and the challenges insurers are now facing, including the Board’s responsibilities as part of the validation process. We also outline how the validation activities may be split across different teams and how insurers can use their three lines of defence to coordinate the validation work.
Insurance Market Update (PDF)