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How Finalyse can help
INTERNAL MODELS APPROVAL AND VALIDATION
There is a rigorous approval process for use of full and partial internal models, making major changes to internal models and making changes to the policy for changing internal models for Solvency II. Also, under Solvency II, an independent model validation is required to be carried out in relation to an insurance company’s internal model, which is to be used to calculate the Solvency Capital Requirement (“SCR”) and used widely across the company as part of the system of governance, particularly in the coverage of material risks.
Finalyse combines an academic perspective with a practical approach to the implementation and validation of internal models, helping insurers manage this balancing act along each step of the process.
How does Finalyse address your challenges?
IMAP project coordination:
Planning, deliverables tracking, implementation and maintenance of a model inventory and development of the validation policy and framework
Market risk calibration:
Data analysis, Statistical analysis, Preparing the documentation and presenting to the internal governance committees
Setting dependency assumptions:
Understanding the factors affecting the diversification benefit, benchmarking, sensitivity testing and critical scenario analyses
Setting correlation assumptions for material market risks (equity, credit and interest rate), including the correlations for these risks between different geographies
Reporting and disclosures:
Providing assistance with the IMAP Self-Assessment Template including coordination, consolidation and qualitative validation of evidence, documentation, follow-up of legislative developments and market insight
Independent model validation reviews:
Setting key design principles, assessing appropriateness of the methodology, data, assumptions and probability distributions and documenting results
How does it work in practice?
High level overview of the IMAP Process
Tests and standards applicable to an internal model
Key Features
- Given the ever-increasing regulatory scrutiny in the context of the Solvency II European framework, the internal models/actuarial models must respect the fundamental guiding principles and accepted market practices.
- Besides being a regulatory requirement for insurers since the introduction of Solvency II in January 2016, an internal model lies at the core of risk management for insurers.
- Working with Finalyse on the design of an internal model, you will benefit from the broad experience we have accumulated in the area of risk and actuarial.
- Finalyse will provide solutions tailored to your modelling methodologies and business requirements.
Our subject matter experts
Francis is a Principal Consultant in charge of our insurance practice in Dublin. He has 15 years of experience within the life and non-life (re)insurance industry. His expertise covers the areas of financial reporting, prudential regulation, and actuarial modelling. Francis has worked in both industry and consulting with extensive exposure to Solvency II and BMA-regulated clients and a keen eye on new regulatory developments.
François-Xavier is a Principal Consultant with advanced expertise in Financial Markets, ALM and Risk Management, covering both banks and insurance companies. On the banking side, François-Xavier is a practice leader on Valuation, IRRBB, FRTB, VaR, Initial Margin and Counterparty Risk, well acquainted with the regulatory requirements and the market practices surrounding market risks. On the insurance side, François-Xavier has extended experience in the regulatory treatment of financial instruments, ORSA, and hedging balance sheets against interest rate, credit spread and inflation risks.
Bence is a senior actuary with 20+ years of experience in life actuarial science and reporting in Solvency II, IFRS, BMA EBS and ICS regulations. His focus has been on actuarial and risk modelling - including capital projections, market risk management and internal model validation – and ERM framework design. Bence delivers business transformation, reinsurance, new authorisation and M&A projects and is keen on applying machine learning and data analytics for actuarial use cases.
Eoin is a Senior Consultant in the Finalyse risk advisory insurance practice based in Dublin. He is an Associate of the UK Institute and Faculty of Actuaries and a Chartered Enterprise Risk Actuary. He has experience in end-to-end monthly and quarterly statutory valuations, ORSAs, experience investigations and system migrations for clients. He has expertise in Solvency II and strong modelling experience in SAS and Python.