I have tried to cover the distinction between ITS and the other weaponry in the hands of EIOPA and legislators here. The aggregated feedback received by EIOPA on the suite of Solvency II approvals covered by ITS is neatly summarised in this doc, with EIOPA adding dollops of proportionality into the summary, to effectively remind supervisors not to treat the applications of giants and pygmys with the same vigour. Given the audience reaction to the UK regulator's industry event a couple of weeks ago, I think 'proportionality' may need to become the PRA's middle name (though it probably works better as its first name...)
Clearly, two big moans have been common threads in the responses received, and both have been rebuffed. The concept of supervisory requests for supplementary information "stopping the clock" on one's approval window has been retained, while the idea of "no answer in 6 months equals approval" has been firmly rejected.
|Internal Model approval|
- "Easy, Easy"
I thought the following was worth highlighting;
- Given that the Delegated Acts are already loaded with granular Documentation requirements for IM applications (articles 243 & 244), the ITS insists on a few more pieces! Having cross-referenced between the DAs and the ITS, I reckon the items listed in Article 3 d, h, j, p, q and r are all new requirements, though none would be a stretch to produce.
- Expectations that your model has been in use prior to application (Art 2 (3 a ii)), and is integrated into your current system of governance (Act 2 (c)) - perhaps this is the effort which firms with capital add-ons will be compelled to do in 2016 & 2017 in advance of model applications?
- Results of your "last" Validation Process must be submitted in a Model application (Art 2 (m)) - again, suggests there will need to be a year's worth of "live" modelling in advance of making an application
- The supervisors have 30 days to assess the "completeness" of an application - this feels weirdly generous, given those 30 days count towards the overall 6-month assessment window (provided the application is complete).
- Despite the PRA's firm assertion on Oct 17th (slide 8) that conditional approval for Model applications is not available, Articles 3 (8) and 5 (4 b) both suggest otherwise, namely that proposed "adjustments" or "terms and conditions" can be accounted for in their decision.
- As much prominence being given to Model Change process and Model Change policy as the initial Model Application process - applications can actually be rejected on the strength of the change policy (Art 5 (2)). Despite that, the articles designated for these areas (Arts 7 & 8) are relatively straightforward.