By Vivek Syal, Director, PwC
At this stage, the Prudential Regulatory Authority (‘PRA’) is unlikely to provide significant flexibility around submission slots given the increased certainty surrounding the implementation date. It is therefore essential to meet their allocated submission deadline to mitigate the risk of failing to achieve day 1 model approval.
IMAP submissions/applications are a challenge to compile and for the PRA to review given the potential volume and complexity of information involved. In December 2013, the PRA provided an overview of some of the good and bad examples of IMAP documentation based on information it had received to date and much of what the PRA has said underlines the importance of high quality review of the IMAP submission and related documentation. Ideally this should be owned by your Board and undertaken by knowledgeable people who are not involved in the day-to-day production of the documentation, to ensure consistency, clarity and appropriate evidencing of how requirements have been addressed.
The PRA will allocate its limited resources to undertake a large amount of IMAP review work in a short period of time. It is therefore essential your submissions are well structured and accessible to PRA reviewers at key junctures in your programme critical path. If the documentation is not sufficiently clear, the PRA will revert to the insurer for clarification, using up scarce review time and creating additional work for both the PRA and the insurer. Clearly, this will increase the risk of not receiving day 1 model approval.
The requirements for the IMAP application are set out in Article 2(3) (a) to (r) of the draft Implementing Technical Standards (‘ITS’) for IMAP as specified in EIOPA’s consultation paper. The consultation period ended on 30 June 2014. EIOPA will publish the final report on the consultation and submit the ITS to the European Commission for endorsement by 31 October 2014. Firms now face the challenge of deciding when and how to transition from the PRA’s SAT332 to the EIOPA SAT.
Solvency II implementation presents a number of significant challenges for all in-scope insurers and represents a step change in standards of risk and capital management – whether you are hoping to use an internal model to calculate the SCR, or the Standard Formula. For those of you that are internal model firms’ however, the challenges are even greater and insurers should also ensure that there are appropriate contingency plans in place should they not receive full/partial approval.
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