Assessing the appropriateness of the Standard Formula: Survey results August 2015

Under the Central Bank of Ireland’s Guidelines on Preparing for Solvency II, all insurance and reinsurance undertakings are required to prepare a Forward Looking Assessment of Own Risks (“FLAOR”) in 2014 and 2015. Those companies rated as high or medium-high impact under the Central Bank’s PRISM rating system, which are not in either the pre-application or application process for an internal model, are required from 2015 to perform an assessment of whether their risk profile significantly deviates from the assumptions underlying the standard formula Solvency Capital Requirement (“SCR”). This requirement will apply to all companies from 2016 onward. In order to gain some insight into companies’ progress in relation to assessing the appropriateness of the standard formula for their risk profile in their 2015 FLAOR, we conducted an analysis of the responses of 27 standard formula companies that agreed to participate in our survey.