Amit Lad contributed to the writing of this blog
On 08 November 2013 the Prudential Regulation Authority (PRA) sent out a request to firms in the Internal Model Approval Process (IMAP) for data for the mid-year calculation of the Early Warning Indicators (EWIs)1.
What are EWIs?
One of the regulators concern is that, if not adequately monitored and updated, the solvency standard delivered by internal models can deteriorate over time. EWIs are a non-modelled cross check to ensure that internal models continue to meet the Solvency II calibration requirement (99.5% over a one-year time horizon).
The basic indicator that the regulator has opted for is the ratio between the Individual Capital Guidance (ICG) to the pre-corridor Minimum Capital Requirement (pMCR).
The idea behind EWIs is that they provide a warning so that firms and the regulator can take pre-emptive actions to ensure that their model is performing adequately.
If you have received a request from the PRA, then you need to submit the requested data by Tuesday 17 December. The PRA will add this to the data already collected and use to aid in the development, testing and refinement of EWIs.