PRA on Solvency II Approvals - One in the "IMAP"

The PRA today released a consultation paper on applying for Solvency II approvals (with the checklists for firms thinking of applying here), covering such juicy topics  as;

• Matching adjustments
• Ancilliary own funds
• USPs
• Group shenanighans (single ORSA for Groups, and excluding entities from Groups)
• SFCR dispensations

And of course the big man on campus - Internal Model Approval.


I had covered on here back in March that EIOPA intened to bring in a common internal model application package (press release here), whilst also noting that while EIOPA "expected" NCAs to accept and use it, it was not compulsory.

IMAP - waste not want not

With the UK being the largest Internal Model application handler by some distance, the stupendous amount of money, management time and administrative effort which had been injected into the IMAP Process since 2011, there was at least a theoretical possibility that the PRA might say "no thanks", and ask its applicants to continue as they were, albeit with an Excel template amended to reflect the Directive and Delegated Acts as they currently stand

Therefore the rather vicious tearing of hair and gnarling of teeth coming from the UK today is the sound of 60-odd internal model applicants finding out that 3 years of IMAP work is now redundant! Section 2.11 of today's CP states;

EIOPA is expected to publish an internal model application template which the PRA will require all firms to use for their formal internal model applications.

...[firms] will be expected to transpose data onto the new EIOPA template when they make their formal application. The PRA will not be updating the SAT to align with EIOPA's application template

Perhaps I am being a touch harsh to call IMAP efforts to-date "redundant". The UK will naturally have dominated EIOPA discussions around what a template should contain, and how it should be structured to assess applications with maximum efficiency, as they have had the Chair of the Internal Model Committee since 2009!

There is an implication in the CP though that the transposition between the two "templates" will not be as seamless as I had imagined back in March, so I suspect that internal model applicants will need to go back to the market looking for expensive IMAP cajolers in the not too distant future. A shame for UK plc, who will rightly feel they have spent a lifetime's money on this topic already.