Internal Model Approval Process (IMAP)

IMAP is where risk modelling meets governance and regulatory requirements. In order to obtain the UK PRA approval for the use of an internal model to calculate capital requirements, insurers must meet certain requirements, set out in Solvency II directive and Delegated Acts

 

It’s necessary to provide reassurance of the statistical quality of the model and data, calibration, validation, profit and loss attribution, documentation and use test. This can be a daunting process and having the expert consultancy resources of Crescendo Advisors can deliver significant financial and intangible benefits – why make it harder than it needs to be?

 

Crescendo Advisors’ experience of the IMAP process is extensive and includes:

  • developing and implementing data governance principles

  • developing and implementing approaches for model change

  • planning of internal model validation covering technical aspects, scoping, evidence identification and managing relationship with risk and internal audit

  • ​​evidencing compliance with the use test

  • leading the development of the actual internal model application and letter to the PRA

 

In Crescendo’s experience there are 5 areas surrounding the model development that must be fully addressed to avoid problems with the Internal Model Approval Process and the UK PRA

 

Project Timeframe

The approval process is lengthy due to the uncertainty as to how the process will develop. PRA can, and will ask many rounds of questions to satisfy themselves that the model is fit-for-purpose which you need to answer in a timely manner

 

Collaboration with PRA

 

Although insurers may be uncomfortable with the level of scrutiny from the PRA for model approval, it is wise to adopt a positive collaborative approach to ensure the process flows as smoothly as possible

Ownership of the Model

Business ownership of the model must be clearly evidenced to the PRA throughout the process.  

 

Board engagement and understanding

Board members must be able to demonstrate a general understanding of how the model operates. Ensure sufficient Board member training is available and provide evidence of the model’s use in overall Board’s strategic thinking and planning

Model governance must be prioritised

The PRA will require evidence of appropriate model governance before the application is submitted

Using a consultancy with a deep understanding and experience, not only of the internal process steps, but also the handling of the PRA relationship, will alleviate your operational issues around IMAP and give your Board reassurances that everything is being taken care with minimum disruption to operational business

Click here for a white paper on the lessons from our experience

If you would like to talk to us about how we can provide oversight or project management for your IMAP, call us today on 07766 725315 or email isaac.alfon@crescendo-erm.com

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