Inevitably, when you go from basic – Solvency I – to sophisticated – Solvency II – you have to accept an increase in the level of complexity. So, no surprise, not only are internal models very complex, but also USPs and even the standard formula. The latter is the method chosen by most SMIs to calculate their capital requirements.
The Report of the Internal Group was discussed extensively in the meetings of the Technical Advisory Committee on financial markets which consists of market participants, experts and regulators. We have also had the benefit of an array of expert views, including those of the Ministry of Finance which were indeed valuable in giving final contours to the framework.