Objective and key requirements of this PObjective and key requirements of this Prudential Standard

Objective and key requirements of this Prudential Standard

This Prudential Standard sets out the requirements that a general insurer or Level 2 insurance group must meet to use an Internal Model-based Method for calculating the Minimum Capital Requirement of the insurer or Level 2 insurance group, both at the time of application and subsequently.

The key requirements to obtain and maintain approval for the use of an Internal Model-based Method are:

• the insurer or Level 2 insurance group must have an advanced approach to risk management and capital management which includes an appropriate Economic Capital Model;
• governance arrangements for the development and use of the Economic Capital Model must be suitable;
• the Economic Capital Model must be used by the insurer or Level 2 insurance group for its own purposes or for the purposes of the group and be embedded in management, operations and decision making processes; and
• the Economic Capital Model must be technically sufficient to produce a reliable estimate of the capital required by the insurer or Level 2 insurance group.