Objective and key requirements of this P

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 prescribed capital amount of the general insurer or Level 2 insurance group, both at the time of application and subsequently.

The ultimate responsibility for complying with the requirements to obtain and maintain approval for the use of an Internal Model-based Method rests with the Board of directors of a general insurer or Level 2 insurance group.

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

• the general insurer or Level 2 insurance group must have an Internal Capital Adequacy Assessment Process that demonstrates an advanced approach to risk management and capital management that includes an appropriate Economic Capital Model;
• governance arrangements for the development and use of the Economic Capital Model are suitable;
• the Economic Capital Model must be used by the general 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 general insurer or Level 2 insurance group.