Early IMAP submission postponement - knock on effects?

Having seen the comments of the FSA's man (p4) on those firms scheduled for early internal model application assessment (namely that "it is vitally important that submission slots are adhered to"), it seemed more than coincidental that the Lloyds of London application, due in at the end of April, has been pushed back 3 months.

Not sure of the drivers behind it (indeed it is worded like they are doing the FSA a favour!), but the recent release of this PwC document on "learning from the early movers" seems prescient, particularly around bridging gaps in preparedness! Alternatively, this article suggests that avoiding dual runs of ICA and internal model in 2013 has driven the delay.

Regardless, while the FSA have gone to some lengths in the IMAP industry presentation to ask for adherence to timescales, pleading personnel poverty, is there a danger that such a big player getting reassigned this early on will have knock on effects for other applicants?

Late post script - Lloyds FD put some words out in relation to the delayed application, justifying it after some FSA 'backtracking' on application completeness.

FSA and Solvency II - speech from Julian Adams today for IMAP firms

Hot off the press, Julian Adams spoke to the great and good today (i.e. I wasn't there!) regarding those who are in IMAP, and dropped the following hot chat:

• "What [any further delay off the back of March's ECON vote] might do instead is merely compress the period between transposition and implementation"
• "...for the time being we remain of the view that we must plan for a 2014 implementation"
• "...it is vitally important that you stick to the submission slots we have already agreed with you"
• "By sticking to your submission slot you will also be considered alongside a peer group of firms" - this is the first I have heard of submission slots being allocated to groups of 'peer' companies, assuming this was not a figure of speech
• "...we are basing our approach to the next phase [of IMAP] on the stable draft text of the Level 2 material which was circulated by the Commission in November" - which is nice if everyone else had access to it [leaks notwithstanding!]
• "[we] will be publishing later today an updated version of the self assessment template based on this" - you may be able to sers toi at this location (ZIP file) 
• "We appreciate that this change will require some additional work for firms" - nicely played down!
• "...the materials we are launching today do not take any account of the Level three text", but promises to do more once the L3's stabilise
• On technical provisions - "Our view is that we would not be able to approve a model under Solvency II without having reasonable assurance as to the accuracy of the underlying balance sheet, and we will therefore be undertaking a review of the technical provisions of IMAP firms as part of our existing activity with the firm before and after its submission slot"
• "...it is unlikely that we will review the calculation of technical provisions until a point in 2013", while the approach used will be assessed earlier, but "which may include the use of external review"
• "It will be necessary for us to gain assurance that all [300+ criteria in the Directive text] of these requirements have been met before we can decide to grant approval for a model’s use

That may take a while to digest, so let's see what tomorrow brings...

ABI Conference - FSA's Adams speaks on Internal Model Applications

The FSA have just published Julian Adams' speech on Internal Models from yesterday at the ABI Conference.

Worth noting;

On the potential to replace ICA with SCR for 2013 (which Lloyds et al have been lobbying hard on);

“What we are in a position to do, however, is to invite firms to consider how they think their work on their Solvency II model could be used to meet those current rules, thereby removing the need for parallel running of two different models”

“As the current requirements will remain in force, it will be incumbent on firms to satisfy themselves that the Solvency II model, alongside their wider system of risk management and governance, meets the existing requirements in our Handbook. By approaching the issue in this way, we intend to avoid the need for firms to apply for a complicated series of waivers or to seek specific permission from us to make the transition early. We believe this is both proportionate and appropriate, given the amount of review work we will have done with firms following submission of their Solvency II model application to us”

On the basis to be used for internal model applications (the original guidance, or EIOPA's L2 on Tests and Standards for internal model approval)

“It is clear that the Level 2 text – and, in due course, the Level 3 text which will supplement it – is more appropriate to use as a matter of principle, since this sets out much more clearly the basis on which we are expected to assess firms’ applications, and it is the standard against which you and we will ultimately be judged”

“On balance, we feel that basing our application approach on the Level 2 text is the most sensible way to proceed, and we propose to do this is by cross-referencing the Level 2 text in the guidance materials we will be making available to firms in February of next year”

“I am aware that this will mean that some firms may feel that their efforts in following the Contents of Application approach will have been wasted, and I would like to reassure you that this is not the case. We will expect you to submit documentary evidence that you meet the requirements set out in the Directive, and completion of the Contents of Application is likely to go a long way towards demonstrating compliance with the Level 2 requirements, but it is those Level 2 requirements which will be definitive”

Looks like anyone who is going to get pre-approval to use their model to meet existing FSA handbook requirements is going to have to jump through a lot of hoops, and even then may fall short