ABI publishes Solvency II internal model approval advice
by Gill Montia
The Association of British Insurers (ABI) has published advice on the Solvency II internal model approval process in the first of a series of papers aimed at helping insurance companies implement the new regime.
Final Solvency II rules are incomplete but the ABI’s “sensible” approach to the model approval process forms the basis for the approach that the Association will be working toward and lobbying for.
Where firms have already begun work on internal model approval, the advice should also shed light on the purpose and context of the process.
Meanwhile, Aon Benfield has been calling for a simplified approval process for natural catastrophe risk, arguing that it would encourage insurers to better quantify these exposures under Solvency II.
The current framework gives firms the option of using either a standardised scenario approach or developing a partial internal model for natural hazard risks.
However, Aon believes that the approval process for the partial internal model could be costly and onerous and is therefore lobbying for changes that it says could allow more re/insurers to realise the benefits of a partial internal model.