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The purpose of the peer reviews was to assess the practices of supervisors and colleges related to the review of internal models during the pre-application process. Both peer reviews cover supervisory practices in 24 Member States.
Differences of supervisory practices in the pre-application process of internal models were identified in the following important areas: interpretation of the requirements; the philosophies underpinning how to review models, the use of proportionality as well as the organisation and expectations of on-site visits.
The Report summarises best practices in the areas of communication, reviews, planning, pre-application packages, training and colleges of supervisors and outlines a number of recommendations addressed to NSAs and EIOPA.
In a next step, EIOPA will ensure a proper follow-up to the recommendations as well as the best practices.
Julian Adams, Chair of EIOPA Review Panel and Deputy Head of the Prudential Regulation Authority and Executive Director Insurance (the UK), indicated: “The move to recognise internal models as a means of calculating regulatory capital is a fundamental change in supervisory practice for all national supervisory authorities. Against this backdrop, the EIOPA Review Panel made a broad number of recommendations addressed to EIOPA, the Internal Models Committee and the vast majority of national supervisory authorities. It is imperative that the recommendations are addressed speedily and comprehensively so that we can collectively move towards supervisory convergence. The Review Panel will initiate a follow-up review in the coming year to monitor progress and gather further examples of best practice.”
Gabriel Bernardino, Chairman of EIOPA, said: “I want to thank the Review Panel for this Report that raises a number of serious issues and provides important recommendations. I am encouraged by the fact that a number of national supervisory authorities have already started to review their processes to build upon the findings of these peer reviews. From our side we are going to develop a plan to implement the recommendations and monitor their application. This will ensure consistency and improve the functioning of colleges”.