SS15/16 – Solvency II: Monitoring model drift and standard formula SCR reporting for firms with permission to use an internal model

What Changed

• The supervisory statement introduces several core regulatory expectations:
• Internal Model Maintenance Requirement: Firms with approved internal models must maintain the capability to calculate SCR using the standard formula, even if they primarily use internal models for capital calculations.
• Standard Formula SCR Reporting: Firms using approved internal models to calculate solo SCR are expected to report standard formula SCR results privately to the PRA on an annual basis.
• Model Drift Monitoring Framework: The PRA uses model drift ratios calculated at model approval and re-based following material changes in risk profile or major model changes to monitor whether internal models remain appropriate.
• Submission Format and Timing: Standard formula SCR information must be submitted through XBRL-enabled Excel files or full XBRL format, four weeks following firms' annual quantitative reporting template submission dates. As of the September 2025 updat
• Audit and Approval Requirements: Standard formula calculations do not require external audit but must be approved by senior management before submission.

Suggested Considerations

• *Maintain Dual Calculation Capability: Preserve the technical ability to calculate SCR using the standard formula, regardless of internal model approval status.
• *Establish Annual Reporting Process: Implement procedures to calculate and submit standard formula SCR results annually through XBRL-enabled Excel or full XBRL format via BEEDS portal.
• *Integrate into Risk Management: Incorporate standard formula SCR calculations into own risk and solvency assessment (ORSA), risk management, and model validation cycles.
• *Obtain Senior Management Approval: Ensure standard formula submissions are reviewed and approved by appropriately authorized senior management before submission.
• *Maintain Supporting Documentation: Retain quantitative and qualitative documentation supporting standard formula calculations to demonstrate appropriateness for model drift monitoring purposes.
• *Monitor Model Drift Ratios: Track model drift ratios using objective measures of risk (standard formula SCR, pre-corridor MCR, net written premium, and best estimate liabilities) to identify material divergences.

Key Dates

Who is Affected