Wednesday, 27 February 2013

Lloyds - cognition and how human factors affect risk perception

While the Solvency II world will be as grateful for as they are familiar with Lloyds of London's work in the Sol II sphere, they pushed out an intriguing paper for all risk practitioners this week around cognition, the impact of human behaviour, and our interaction with models when identifying and assessing risks.

This is a piece of academic research very much needed at this point in time, where the regulatory obligations around internal model challenge have yet to formally land, let alone be adequately road-tested, while at the same time the UK is continuing with its ICAS+ regime, where entrants will no doubt receive running commentary on their progress in upscaling both assumption/parameter challenge as well as model use.

Anyone involved in the 200-ish pre-applications for internal model use prior to Solvency II go-live in Europe would therefore benefit from a read of this, particularly if you are on the validation-side. I picked out the following;

Fundamentals which impact on modelling choices (data sets, interpolation/extrapolation, correlations, tail dependencies etc)

  • "We are not equally aware of all risks...people make decisions based on a subset of the available evidence"
  • "Expectations are strongly influenced by personal experience and current events"
  • Tendency to "...lose sight of infrequent losses" in the face of more frequent visible events
  • Tendency to procrastinate around risks which are difficult to assess
  • "Some may query the relevance of human factors, given the prevalence of quantitative risk models - the suggestion being.modelling rules out biases"
Risk appetite
  • "Low risk appetite can increase false alarms, and a high risk appetite increases misses"
  • "The greater risk appetite of powerful individuals can stem from a tendency to focus more on rewards and successes, while people who are lacking in power are often more cautious and attentive to threats and potential obstacles" - is it this dichotomy which makes the role of the CRO ultimus inter pares in the boardroom?
Aide-memoire lists for risk practitioners
  • How to counteract risk perceptions - p11
  • Separating risk perceptions from immediate context - p13
  • Awareness of bias linked to power - p16
  • Risks in perspective - p20
  • Behavioural principles which can create added value - p22

Tuesday, 26 February 2013

Clear Path Analysis - Interview with EIOPA's Montalvo

The guys at Clear Path Analysis have come through with another suite of exclusive Solvency II material, following along from their efforts in September 2012 and 2011 (sign up required if you are not already hooked up with them).

This is dominated by asset allocation and Pillar 3 requirements, and I'll cover through those in due course. It was the interview with Sr. Montalvo from EIOPA which immediately caught my eye, so I picked the following bones out of it:

  • Solvency II is "...nothing more and nothing less than a risk-based supervisory framework"
  • Solvency II "aims to be a neutral system" with regard to asset allocation
  • "The new framework creates business opportunities rather than operational risks"
  • "No Pillar prevails, all are equally important" 
  • The capital weightings on asset lines are based on "...sound technical calculations that were taken by the supervisory community (and in particular by the actuarial teams involved)" - is this a tacit acknowledgement of a residual element of black-boxedness?
  • On IFRS convergence "...we had to move forward because in the accounting areas progress was not being sufficiently made". 'Aimerez-vous rencontrer M. Kettle, M. Pot?'
  • On early implementation, "...once we see how it is working, [EIOPA] will have the courage to say which things can be improved"
Perhaps his sweetest quote is worth isolating:

Monday, 25 February 2013

Elderfield speech to Institute of Directors in Ireland - 'the Gene Genie'

With all the subtlety of an American industrialist in Paris, Mr. Elderfield delivered a speech to the Irish IoD this week focused on the Central Bank of Ireland's refresh of its 3-year strategic plan, as well as reinforcing what it expects financial services Boards to be focusing on in the near future.

This of course should sit in the context of what I covered last week on thematic enforcement work in 2013. Aside from his comments around board diversity, namely that the CBoI's 'fit and proper' activity to date is "...broadening the gene pool of corporate life" (eeeewwwww!), emphasis was given  to three particular areas:

Risk Appetite Statements
  • CBoI expects "... [a] high quality risk appetite statement that is well understood and implemented throughout the firm in practice"
  • "...clear articulation of the acceptable level of different confidence levels, is an important discipline and an essential compliment to a well-articulated business strategy"
  • That, due to disappointments in the past, Risk Appetite statements are "...certainly an area of increasing interest on [the regulator's] part, and where we are debating the best approach for encouraging improvements"

System of Governance and Risk Culture
  • Boards should "...provide broad, challenging scrutiny of your firm's culture regarding regulatory compliance and internal challenge"
  • Ensure that there are "...appropriately resourced and well-qualified risk management and compliance functions"
  • "Think more fundamentally and strategically about the culture in the institution that you oversee"
I would add that a lot of this sits nicely with the FSB's Risk Governance paper which was released last week.

Board composition
  • Expect directors to take a "...hard nosed view on Board composition, with a view to improving performance"
  • Endeavour to attain the "...right gender diversity...and international experience"
With Risk Appetite and Risk Culture both having featured on the IRM's hitlist recently, the practitioners over there will have some assistance to hand from an industry body, however there should be some other useful stuff available in the tag cloud at the bottom of this page on appetite, culture and diversity if you are struggling for inspiration.

Friday, 22 February 2013

Adams speech to the Economist Insurance Summit - lessons from financial crisis

Some particularly useful context setting from Julian Adams last week for anyone in the Internal Model game, with this speech to the Economist Insurance Summit around what lessons could be learned by insurance supervisors from the financial crisis.

While he amusingly interchanges between "financial crisis" and "banking crisis" to emphasise that it wasn't our fault, and drops in the now obligatory reference to the importance of insurers as long-term investors, echoing the Commission's pleas from late last year, the majority of the speech focuses on why models go wrong (not the name of a ropey catwalk reality tv show...)

Insight on where the FSA thought firms were going awry in the Solvency II modelling preparations was delivered to the industry in the middle of last year, but I found this speech helpful in the context of proportionality i.e. what elements of economic capital modelling are worth spending extra time on theorising, documenting, debating and minuting for IMAP candidates. I saw the following comments as highlights;

Reasons for internal models in the banking industry being exposed;

  • "...rested on assumptions which turned out not to hold when bad times came"
  • " period" selected when parameterising
  • "...insufficient rigour and independence from the front end of the business" when parameterising
  • " attention too often focused on those parameters considered too conservative at the expense of those that were insufficiently prudent"
  • "...destabilising feedback loops" where underestimation of risk (due to data selection) plus use of the model leads to a vicious cycle of unacknowledged over-accumulation of risk
  • "...flawed technical assumptions" in tail-end probability estimation where data is drawn from "normal" times
Lessons for Solvency II
  • "Data [should be] sufficiently robust"
  • Assumptions should be "appropriately conservative"
  • "[Supervisors] can be the much greater use of imaginative tests of resilience to deeply stressed scenarios"
  • "...paucity of relevant historical data for the calibration of tail dependencies between risks"
  • That "...the limitations [of capturing tail dependencies] are recognised, and conservatism built in to the calibrations"
  • That "...correlations in the tail are likely to be assymetric in nature" for insurers
  • That "...the adoption of quantitative techniques...will not change the nature of the risk itself"
  • That supervisors "...must not blindly accept the outputs of these models"
Appreciating some of this is hardly new news, any increased documentation and rigour in the areas highlighted will no doubt be well received down at the Wharf.

Wednesday, 20 February 2013

Protiviti - top risks for 2013

Nice piece of 'top risks' benchmarking for practitioners was pushed out this week by Protiviti - heavily US-centric, cross-industry (around 25% financial services, but all respondents are C-suite types), and the 'risks' are provided as a selection of 20 pre-written items, but the work has still got some mileage, even if I am far from convinved by the early statement that "...the first question an organisation seeks to answer in risk management is 'what are our most critical risks'" with no reference to their strategic objectives!

Let's take that as an editorial oversight, and pick through the highlights;
  • Unsurprisingly, economic conditions and regulatory change/scrutiny are top of the financial services hitlist of 'top risks' (and indeed other industries)
  • CROs and Chief Audit Executives were less likely to rate a risk "less significant" than their first-line counterparts - nest feathering or legitimate conservatism?
  • Financial services considerably more likely to deploy additional resource to enhance risk management capabilities in the next year
There is also a "suggested questions for Boards" list at the back, which covers (albeit in a rather flannel-y fashion) the kind of items which emerged in the FSB's risk governance recommendations from earlier in the week, such as;
  • Is the Board sufficiently involved in/informed of the risk assessment process regarding the implementation of strategy (mergers & acquisitions, new lines etc)?
  • Is the MI around the Risk Profile sufficient?
  • Is there an existing emerging risk management process?
  • Is the risk profile consistent with risk appetite?
A decent piece to run through your NEDs at the very worst, and potentially of some use for your emerging risk/reverse stress testing activities for 2013.

Omnibus II - back to October 2013

Following on from the barely noticeable number of previous posts on Omnibus II Plenary vote delays (here, here, here, here, here and here), we can now stick lucky number 7 in the pot, after the procedure file was updated today to show a postponement to October 2013 - whilst the delay was inevitable after EIOPA made it clear that the Long Term Guarantees Assessment report would only reach the co-legislators by July, the actual date helps with short-term planning for all stakeholders concerned.

I guess the big questions that emerge from a delay to October are:

  • Whether it is enough time, factoring in the summer holidays, to consume the LTG report, acknowledge its outcomes regardless of which territory benefits most from the conclusions, and vote positively
  • Whether it is actually too much time to pull apart the report's outcomes, and between the trilogue parties, industry lobbyists and any national political pressures than can be marshalled in the interim, October just becomes the next promises graveyard.
  • The increasing proximity of this date to the campaigning for the 2014 EU parliamentary elections, which must surely impact on how the voting will go if the LTG report gives a duff outcome to those countries still writing swathes of guaranteed business
  • The entry into the mix of Karel van Hulle's replacement (haven't seen a name yet)

Not certain if 2016 is exactly riding on Omnibus II approval by October, but one feels it would certainly help restore some credibility.

Monday, 18 February 2013

Munich Re on Solvency II Control Functions - an actuary for all seasons...

Munich Re have continued their infrequent-yet-valuable Solvency Knowledge Series with a piece on Key functions within the system of governance of insurers under Solvency II.

Of course to the grizzled old set of risk practitioners who have done the rounds for the last few years, the fundamentals of the directive's requirements on the four control functions are as basic as the ingredients list for a frozen lasagne. It naturally draws attention to the likelihood that there will be "some overlap" between the activities of Risk, Actuarial, Compliance and Internal Audit, as well as touching on outsourcing as " attractive way of meeting the wide range of requirements" for those

However I detected more than a whiff of controversy around the content of this particular publication (which I hasten to add is a smart read nevertheless), were one to take it at face value. In particular;
  • Their use of the three lines of defence model in the publication - while perceived to be good practice for segregating operations from risk advisory from risk assurance, it is certainly not cited in any existing materials at Level 1, 2 or 3, and the structure may be disproportionate at the small end of the insurer spectrum. On top of that is the Actuarial function's acknowledged dwelling over a grey area between the first and second lines, in particular if they haven't catered separately for the reporting lines of reserving, pricing and capital management actuaries (p8).
  • The comment that "The risk management function will no doubt have to include people with a professional scientific and mathematical background, ideally backed up by appropriate qualifications (eg actuaries)". Whilst, internal model or not, the Actuarial function will clearly have to provide "considerable support" to the Risk function, I don't see any reason at the small-to-medium level for the Risk function to include actuaries unless through choice, using the lever of proportionality.
  • That the Risk function "...shares responsibility for the risk strategy" - I think the implication is that it shares responsibility with the Board, but the statement doesn't help identify a) who authors and authorizes it and b) who gets fired for its poor deployment! I am more inclined to think the Risk function owns the risk management system and is responsible for monitoring and reporting on the implementation of the risk strategy which sits within it. The FSA define their requirements on this page in any case.
  • That the Risk function "...identify potential risks and recommend appropriate countermeasures to the Board" - as far as emerging risk/top-down risk assessment goes, I certainly expect the function to facilitate the emerging risk/scenario analysis/reverse stress test activities in this regard, but it is most certainly not a solo job.
  • That "The compliance function...will have to include staff with a legal background" - appreciating what the wording of Article 46 implies in particular, this is more a proportionality/outsourcing issue for me than anything. Having said that, I'm sure any existing compliance professionals out their who didn't take the Bar might feel slighted by this! 
  • That "all four functions have a direct reporting line to the Board" - not certain that this is so in the vast majority of cases. Certainly via Board committees the Risk and Internal Audit functions will be well catered for (and the FSB recommended even better than that for the Risk function last week), but I suspect an executive reporting line is as good as it gets for the other two functions in most firms.
Certainly plenty to engage the grey matt with regardless of your country of origin, even around control function crossover areas (which I presented on at the end of last year), so dig in.

Friday, 15 February 2013

Chartered Institute of Internal Auditors - recommendations for UK financial services

The Chartered Institute of Internal Auditors recently created a sub-committee to provide professional guidance "...designed to be a benchmark for effective internal audit in financial services in the UK", and they have just reported back with this feast of fun, which is a vital read for anyone working in control functions within financial services. The opinions they have used to create this guidance have been purloined not only from the profession itself, but also from other professions, regulatory bodies and executive/non-executive directors

They note in summary that there is "strong support for an unrestricted scope for internal audit", while drawing attention to disparity of opinion around matters such as: IA directly challenging strategy; IA reporting to Risk Committees (rather than audit committees) in certain instances; compulsory attendance of Chief Internal Auditors at Executive Committees; and the direction of managerial reporting lines.

The proposed guidance reads very much like the Corporate Governance Code, and is relatively light. It is broken into the following sections, where I have noted anything I found new or controversial alongside (my focus being predominantly scope creep into the Risk function's activity):

  1. Role and Mandate of IA - increased focus on risk assessment and risk coverage adequacy
  2. Scope and Priorities of IA - unrestricted scope ultimately advised; expected to "independently determine" key risks, and assess "the setting of, and adherence to, risk appetite"; assess the "risk and control culture"; allows for potential involvement of IA on "real time basis" in key corporate events (mergers, disposals, new lines of business etc)
  3. Reporting results - factors in reporting obligations to both Risk and Audit Committees where appropriate, and builds in an expectation of an annual independent assessment of governance (which covers off one of the FSB's recommendations covered yesterday!)
  4. Interaction with Risk, Compliance and Finance functions - nothing new
  5. Independence and Authority - Chief Internal Auditor expected to be executive committee-equivalent, have the right to attend Excom, access to all MI, and report directly to either the Chairman of the Board, Audit Committee or at a push, Risk Committee. A secondary line to an executive director should only go to CEO
  6. Resources - all resourcing decisions effectively divorced from the business, to reside with the Chief Internal Auditor and the Audit Committee
  7. Quality assessment - external assessment of the function recommended periodically.
  8. Relationships with regulators - nothing new
  9. Wider considerations - expectation that the "tone at the top" of a firm should be what fosters acceptance of IA
Any controversy? Perhaps around the seniority of the Chief Internal Auditor, and their assessment of the setting of and adherence to Risk Appetite. I think my main concern as a risk practitioner would be the potential for differences of opinion around what constitutes "adequate" risk management, given the Internal Audit predeliction for COSO on all things risk-related, against the IRM or ISO31000. 

Let battle commence?

Financial Stability Board - Thematic review and recommendation on risk governance

The Financial Stability Board (FSB) have been sticky-beaking around systematically important financial institutions (SIFIs) with a relative unchecked remit ever since the financial crisis first reared its head. This week they have emerged with a very significant document for Risk practitioners across the globe, with a thematic review of Risk Governance (press release also available here). The participants were 36 banking and broker/dealer institutions of interest, as well as major supervisory bodies and NGOs.

On the basis that there isn't a single accepted global standard on the matter, the thematic review compares prevailing practices against an amalgamation of content from exising standards from the IAIS, OECD and other bodies. Of major interest to risk practitioners is the document's focus on areas which the IRM have covered recently, namely risk appetite/tolerance/limts/capacity and risk culture.

Bearing in mind the great and good from the prudential regulatory world are active participants in the FSB, the likelihood of their findings emerging in the regulatory principles of tomorrow are pretty high. Of course this research has been based on Non-Insurance SIFIs, and so insurers large and small who have been endeavouring to meet Solvency II Pillar II requirements will find themselves in a decent spot already.

On that basis, I noted the following;

General recommendations to supervisory bodies (p4)
  1. Formal requirements on the independence and skillsets of Boards
  2. Hold Boards directly accountable for risk governance, and whether or not their existing suite of risk MI is sufficient
  3. Formally elevate the stature, authority and independence of the CRO role
  4. Require an independent assessment of the effectiveness of the risk governance framework to be performed on an annual basis (a list of what Internal Audit would generally review in this context follows on page 24)
  5. Engage "more frequently" with Boards and management to assess risk culture
Sound practices list p30-34 - highlighted below are elements which may be new to the UK in particular, were they to be introduced
  • Boards - annual reviews of member qualifications, skills and time commitments; meet quarterly with regulators; "effectively inculcate" an appropriate risk culture
  • Risk Committee - annual approval of risk management policies
  • Risk Management function - CRO to have direct reporting lines to Board/Risk Committee as well as CEO; public disclosure of CRO firing/hiring; be "actively involved" in strategic decision making processes; meet quarterly with supervisors; stress testing "on demand" at the behest of the business
Risk culture and risk governance supervisory assessment
  • Notes that supervisors need to strengthen their ability to assess a firm's risk governance "...and more specifically its risk culture"
  • "More work is needed" on regulatory assessment of risk appetite frameworks
  • "Risk culture plays a critical role in ensuring effective risk governance practices through changing environments"
  • FSB have a working group exploring the potential for formal risk culture assessments, who are  reporting in September 2013
Risk management functions and CROs
  • Acknowledges that there have been "[raised] supervisory expectations for the risk management function" since the financial crisis
  • Highlights that "most firms note that the CRO has a direct reporting line to the CEO", though "access to the Board" apparently remains more of an expression than a vivid reality
  • "Good progress" has been made on enhancing the stature, authority, and independence of the CRO position
  • Rather non-descript comment that "the Chief Risk Officer and the risk management function are responsible for the firm's risk management across the entire organisation" - responsible for what element, not conduct surely?
Risk appetite/tolerance/limts/capacity
  • Acknowledge a "lack of common terminology for risk appetite, risk profile and risk capacity...within firms, across firms and across national authorities"
  • Definitions of appetite and capacity used by FSB largely line up with IRM's definitions (though the IRM use 'tolerance' rather than 'capacity')
  • "Key features of a Risk Appetite Framework" are listed on p22 - however even those firms considered best in breed commented that there are ongoing "operationalising" problems with RAF rollout
  • Suggest that breaches of 'risk limits' should lead to reductions in exposures (piii) - not sure why the alternative of increasing appetite is not acknowledged

Wednesday, 13 February 2013

EIOPA on Solvency II implementation - "no doubt about it"

Now that most Solvency II stakeholder's hands have been temporarily filled with the LTG spreadsheets and assorted accoutrement, Seniors Bernadino and Montalvo have hit the trade press with more aggression than an Irish prop forward in order to clarify their position on the drivers behind their opinion on interim measures at the end of 2012, as well as the ultimately likelihood of Solvency II implementation.

From Sr. Bernadino to the Actuary magazine

  • On the shortcomings of Solvency I - "...if you have more risk, you should have more capital"
  • "I think it will take until then [2016] to get started" on Solvency II
  • "We [EIOPA] believe 2014 and 2015 can be used as an opportunity to enter into the system in a better way"
  • "Solvency II will be implemented, and there should be no doubt about it"
  • "EIOPA will do the necessary work to make the implementation of Solvency II happen on January 2016"
  • Emphasises that we are "not building from Solvency I", in the face of "Solvency 1.5" questions
  • Notes that EIOPA's opinion on interim measures is borne from concerns that the delay may lead to "different national solutions [emerging] to the detriment of a good functioning market"
  • "Differences between supervisory cultures" is part of the IMAP inconsistency problem - no implication that either the UK is doing too much or mainland Europe not enough
  • Makes the point that stakeholders "...must avoid the temptation of re-opening more issues" - hard to think of any contentious issues which aren't already wide open for debate, but clearly some concern that the current smorgasbord could be supplemented.
  • For those at the smaller end of the market, he gies a specific example of where an Actuarial function could be staffed by someone other than a "pure actuary"
All this in the week where a succession of industry figures in London lined up to flog Solvency II's hobbling carcass, whether it be the IMAP element (Hiscox), or the very premise of one-size-fits-all regulation (Pru). Not a good week to be trying to kill a horse in the UK gents...

Thursday, 7 February 2013

Towers Watson on US ORSA, Economic Capital and modelling trends

Towers have released a few decent bits of material of use to risk practitioners over the last couple of weeks which are worthy of comment. One on Economic Capital for Life Insurers is effectively a sales aid for their RiskAgility modelling software, but actually captures the drivers behind the UK's efforts to improve their ICA models to meet Solvency II requirements.

In particular the references to how firms ought to be making their model output 'useful' where they currently fall short (capital by business/risk/product, daily runs without running ALM models and ability to produce "what if" analysis) should be featuring highly on the agendas of both embedded use practitioners and AMSBs during 2013. Of course the sad part for any users of the software comes with the statement that RiskAgility is built "...specifically to deliver monte carlo simulation of 1 year VaR economic capital" - love to hear how the lack of multi-year is being dealt with in firm's ORSAs!

A second publication on ORSA preparedness in North America is also worth a read, even if only for us EU-based practitioners to have an opportunity to live vicariously through a country which will actually get it implemented! It is a relatively small quantum of respondents (mostly CFOs), and around half think they will be exempt on size grounds, but the perceptions which emerge are still valid, and one should be prepared to encounter this either side of the Atlantic;

  • 21% see it as a compliance exercise, while 60% think it will improve ERM and capital/strategic planning
  • Only 22% see their prevailing ERM frameworks tightly liked to strategic and capital planning
  • Only 40% are ready to implement an ORSA in the next 6-12 months
  • Concerns remain around resource requirements for educating "key personnel" and directors/C-suite - 45% and 66% respectively felt they have work to do in this area without necessarily having enough staff to do so.
  • 13% of respondents didn't see their risk management departments contributing to the ORSA process (I'll get my coat then...)
  • 3 year projection of capital requirements is the most common planning period envisaged
The same North American slant is then given to a financial modelling survey, which gives us another chance to peek over the fence. They found the following;
  • Reasonable amount of dissatisfaction around run-times
  • Around half planning to change their model governance processes in the near future
Looks like the NAIC/EIOPA covergence work should be a walk in the park then, at least on these topic...

Tuesday, 5 February 2013

Central Bank of Ireland - Prudential regulatory agenda for 2013

A pretty meaty speech was delivered last week by the CBoI's head of life insurance supervision, covering the prudential regulatory agenda in Ireland for 2013 and beyond. In essence it is a rather sobering take on the flipside of the Celtic Tiger's death and its impact on what was an effervescent, if still fledgling, cross-border insurance industry, noting that new business volumes recorded in Ireland have declined for the 5th year in a row, and currently aggregate out at a break-even APE/PVNBP margin.

I found there was actually a lot to take from this on the ORSA front, and would recommend any readers on the Emerald Isle pick the bones out of it, in particular that the regulator "expects to see";

  • Strategies reflecting "current market realities" - highlighting excessive commission to brokers, swollen lapse/surrender rates and reduced margins from over-competition.
  • Tight management of costs
  • Increased efforts put in place to retain existing in-force business
  • "Credible business plans"
  • Viable alternatives to grow business through distribution or product range changes (online facilities highlighted specifically)
While much of this may read as common sense, one can reasonably assume that the CBoI is not seeing enough evidence of this in the Financial Condition Reports and strategic plans that currently cross their desks, and are expecting a much meatier ORSA-type approach to managing strategic risks over the business planning period in the immediate future.

Monday, 4 February 2013

FSA and ICA+ - making the best of a bad hand...

The FSA released the letter we've all been waiting for at the end of last week regarding their plans for  allowing UK firms to use their intended Solvency II-ready internal models to calculate their compulsory Individual Capital Assessments between now and the go-live date of Solvency II (don't laugh, it's still possible that it might go live ;-) )

I suspect a mix of suitability, financial necessity and pragmatism has led the regulator to pursue a relatively relaxed take on ICA+ , for example;
  • It is "not a condition for IMAP review or approval"
  • It "does not require Solvency II tests and standards [for internal model approval] to be met"
  • Firms will confirm the scope of material which needs to be reviewed for ICA+ assessment, rather than the FSA themselves
  • They also confirm that it is "not [their] intention" to bring in Solvency II reporting requirements "...any sooner than required by EIOPA"
That said, while the FSA try to thin out the field by noting that ICA+ is "most appropriate" for firms who are both in IMAP and due for a business-as-usual ICA review in the next two years, it would make sense for anyone in IMAP to pursue ICA+, more than anything because of the interminable delays in Europe might put a firm outside of ICA+ at a competitive disadvantage on the capital front.

The onus therefore appears to be on the industry to quantify and explain the differences between the inputs, processes and outputs of their ICA models and Solvency II models, as well as demonstrate how their ORSA processes address the existing requirements of INSPRU, specifically targeting INSPRU 7. There is also a sneaky request for a self-assessment of progress towards achieving compliance with the Solvency II tests and standards for internal model approval.

From a practitioner's perspective, I had a particularly large chortle at the requirement for all materials being used in the ICA+ assessment to have been approved by the firm's Board - I'm sure they are looking forward to another two years of swollen board packs...

There is more information to follow from the FSA in Q2 of this year, presumably on the basis that the  LTG assessment activity they are on the hook for will have concluded, and more focus can be shifted to this pioneering work. Congratulations to them for not overegging this particular pudding, on paper at least.