The draft paper sets out the authors' views of what good practice for the actuarial aspects of internal models will look like in 2012, the year Solvency II is expected to be implemented. Actuaries working on internal models can expect to have to follow such practices if their internal models are to be approved for use in calculating regulatory capital. The paper is therefore relevant for actuaries who plan to work on internal model implementation for Solvency II.
Moreover, the risk quantification techniques discussed in the paper can also be used in the Own Risk Solvency Assessment (ORSA) process also required by Solvency II. The paper is therefore relevant to actuaries working in companies that are not planning to apply to use an internal model.
The paper covers both life and non-life insurance and reinsurance, and reviews current practice as well as setting out possible future practice. This leads to identification of areas for research by the Profession to prepare for 2012 and an indication of the directions this work might take.
The paper is effectively a work in progress, and readers should ask themselves what they should do in response to the ideas discussed.