Approval of an internal model
Overview of the measure
An institution may use an internal model, rather than the standard formula, to calculate its solvency capital requirement. Such use is subject to ACPR approval.
The provisions governing authorisation to use an internal model are found in Articles L.352-1 to L.352-3, Articles R.352-13 to R.352-24 and Articles R.356-19 and R.356-20 of the Insurance Code, applicable to institutions and groups covered by each of the three codes. These provisions are supplemented by the following:
- Articles 222 to 247 and 343 to 350 of Delegated Regulation (EU) 2015/35, known as “Level 2”
- Implementing Regulation (EU) 2015/460 as regards the procedure for improving internal models
- Implementing Regulation (EU) 2015/461 as regards the process designed to reach a joint decision on applications to use a group internal model
Content of the application
The application must contain the following:
- the items listed in Article 2 of the aforementioned Implementing Regulation (EU) 2015/460 on the approval of an internal model
- where the internal model is used for a group, the items listed in the fifth paragraph of Article 343 and the sixth paragraph of Article 347 of the Delegated Regulation
- a summary of the key items in the application, drawing on the list of documents set out above
- documentation on the models used to calculate the best estimate of liabilities
- quantified data on the SCR calculated using the model as well as all quantitative reports calculated using the standard formula
Applicant institutions are encouraged to use the tool made available by EIOPA on its website (“common application template”) to organise their documentation.
(See also the documentation dedicated to pre-applications to use an internal model.)
Where the applicant is an individual French institution, it must submit an application to the ACPR written in French and in electronic format (encrypted USB memory stick) together with a covering letter and a summary of the key components of the application, both in paper form.
Where the applicant is a French group, it must submit an application to the ACPR written in French or another language agreed by the ACPR (usually English) and in electronic format (encrypted USB memory stick). The application must be accompanied by a covering letter and a summary of the key components of the application, both in paper form and written in French and, where applicable, the official languages of other relevant supervisory authorities.
In both cases, the application and accompanying documents should be sent to the following address:
Secrétariat général de l’Autorité de contrôle prudentiel et de résolution
Brigade de contrôle des organismes d’assurance
61 Rue Taitbout
75436 Paris Cedex 09
It should be noted that the cost of any translations required by the ACPR and other relevant supervisory authorities must be borne by the institution applying to use an internal model.
Where the applicant is a French subsidiary of a foreign group that is itself applying to its supervisory authority, the group’s application to use an internal model should be submitted in accordance with the procedures of the country in question. Any potential ACPR requirements in relation to the supervised subsidiary are discussed by the Supervisory College on a case-by-case basis.
Issuance of authorisations
Once an application has been submitted, the ACPR will confirm receipt of the application and give an opinion on its completeness within 30 days where the applicant is an individual institution and 45 days where the applicant is a group.
If the application is complete, the ACPR or the Supervisory College then have a maximum of six months from receipt of the application to reach a decision. During this time, the application may be discussed with the institution as necessary.
Updated on: 06/07/2018 15:12