ABI launches guide to help insurers understand the Internal Model Approval Process

ABI launches guide to help insurers understand the Internal Model Approval Process

ABI launches guide to help insurers understand the Internal Model Approval Process

The ABI has launched advice on the internal model approval process which will help insurers with the implementation of Solvency II. The guide, published today, clarifies the internal model approval process (IMAP) making it more cost effective and manageable.

Under Solvency II insurers will have the choice between using a standard formula or an internal model for calculating the Solvency Capital Requirements (SCR). While some insurers will opt for the standard formula, others prefer a company specific internal model for the calculation of their SCR. Internal models have the advantage that they are more risk-sensitive, capture individual risk profiles more adequately and consequently reduce the capital requirements. Therefore, internal models are expected to produce a lower SCR than the standard model.

Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

“Internal model approval is a crucial element of Solvency II implementation. Applying a new internal model can be a costly burden to firms and we hope this guide provides greater certainty regarding the process demands and expected outputs.”

The ABI guide, developed with the FSA, provides context to the assessment criteria, sets the right expectations and best practice of managing costs, understanding the documentation process and demonstrating the model to regulators.

The guide can be found at:
www.abi.org.uk

– ENDS –

Notes for Editors

1. Solvency II is a Directive developed by the European Commission. It provides a comprehensive new framework for insurance supervision and regulation. It is intended to introduce across the EU a more sophisticated, risk based approach to supervision and capital assessment. It comes in to force on 1 January 2013.

2. Enquiries to:
Liz Forster 020 7216 7444 (Mobile: 07717 578 586)
Malcolm Tarling 020 7216 7410 (Mobile: 07776 147 667)
Erfan Hussain 020 7216 7411 (Mobile: 07712 841 184)
Kelly Ostler-Coyle 020 7216 7415 (Mobile: 07968 364 302)

3. The ABI is the voice of the UK’s insurance, investment and long-term savings industry. It has over 300 members, which together account for around 90% of premiums in the UK domestic market.

The ABI’s role is to:

– Be the voice of the UK insurance industry, leading debate and speaking up for insurers.

– Represent the UK insurance industry to government, regulators and policy makers in the UK, EU and internationally, driving effective public policy and regulation.

– Advocate high standards of customer service within the industry and provide useful information to the public about insurance.

– Promote the benefits of insurance to the government, regulators, policy makers and the public.

The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 24% of the UK’s net worth and contributing the fourth highest corporation tax of any sector. Employing over 275,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with a fifth of its net premium income coming from overseas business.

Insurance and businesses protect themselves against the everyday risks they face, enabling people to own their own homes, travel overseas, provide for a financially secure future and run businesses. Insurance underpins a healthy and prosperous society, enabling businesses and individuals to thrive, safe in the knowledge that problems can be handled and risks carefully managed. Every day, our members pay out £155 million in benefits to pensioners and long-term savers as well as £58 million in general insurance claims.

4. An ISDN line is available for broadcasts.

5. More news and information from the ABI is available on our web site, www.abi.org.uk.