How to assess standard formula appropriateness
In the second of two Risk.net articles on how firms must show the Solvency II standard formula fits their business, Matt Cocke, Andrew Kay, Phil Simpson and Fred Vosvenieks, consultant actuaries at Milliman, discuss the areas where extra detail might be necessary
The Preparatory Guidelines for the Forward Looking Assessment of Own Risks (Flaor) – the pre-cursor to the Own Risk and Solvency Assessment (Orsa) – require companies to assess during 2015 whether their risk profile deviates from the assumptions underlying the Solvency II solvency capital requirement (SCR) calculation, and whether these deviations are significant.
This requirement applies to both standard formula and internal model companies. However, the internal model requirements of Solvency
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