Challenges of Model Change. Catherine Drummond, LCP

Transcription

1 Challenges of Model Change Catherine Drummond, LCP

2 Challenges of model change Agenda Intro: what are the challenges? Progress so far Major vs minor change Things to consider Managing change Questions

3 What are the challenges? Common complaints My policy is telling me major change, but it isn t It takes ages to make the change It takes so long to get approval The regulator is holding things up We have a model, but we haven t got Board sign off yet It s like IMAP all over again! The paperwork is overly onerous We can t use our new numbers yet 23

4 Progress so far The IMAP race 115 firms 90 firms 40 firms 19 firms 24

5 Progress so far 21 over the line to date 25

6 Progress so far Who is model change relevant for? Approved model Aiming for IMAP Standard formula, using model internally 26

7 Progress so far What has the PRA told us so far? May 2015: Model change important, not done well Jan 2016: Look back on approvals We will apply the same standard of rigour to any further approvals sought and to any model change requests for models already approved that we applied in the model reviews we undertook during the second half of last year. May 2016: Process for model change September 2016: Supervisory statement finalising details

8 Too little time Too much time Results from a recent poll How do you and your team spend time when updating your model?

9 Major or minor? and why is it important? Major changes require regulatory approval Not specifically defined insurers have differing views and policies Approaches we have seen: High level More detailed Only major changes defined Major and some minor changes Change in overall SCR Focus on quantitative Change in underlying risk modules Quantitative and qualitative ALL CHANGE! 29

10 Model change policy be SMART Specific Model use Appropriate for the business Regularity of change Thresholds 30

11 Major or minor? Key considerations? Major? Insurance risk Total SCR Operational risk Qualitative change, expert judgement Market risk Credit risk 31

12 Managing major change Hints and tips Clear process for identifying and prioritising Reporting lines Early engagement with Board and regulator Think ahead and learn from mistakes Your ORSA is your friend 32

13 Tips for a hassle-free framework Other easy wins Take care with parallel models Change template with clear messaging What? Why? Impact Analysis of change Validation Training and understanding Don t leave communications too late 33

14 Contact Cat Drummond Partner T: E:

15 Scope This generic presentation should not be relied upon for detailed advice or taken as an authoritative statement of the law. If you would like any assistance or further information, please contact the partner who normally advises you. While this document does not represent our advice, nevertheless it should not be passed to any third party without our formal written agreement. Lane Clark & Peacock LLP 2016 Lane Clark & Peacock LLP is a limited liability partnership registered in England and Wales with registered number OC LCP is a registered trademark in the UK (Regd. TM No ) and in the EU (Regd. TM No ). All partners are members of Lane Clark & Peacock LLP. A list of members names is available for inspection at 95 Wigmore Street, London, W1U 1DQ, the firm s principal place of business and registered office. The firm is regulated by the Institute and Faculty of Actuaries in respect of a range of investment business activities. Locations in London, Winchester, Belgium, the Netherlands, Ireland and the UAE. ic\_nonclient\business Development\Events\Breakfast Briefings\2016\ Breakfast Briefing\Model change\april 2016 Breakfast Briefing - Model Change PPT pptx