On 1 October, EIOPA launched a European-wide comparative study on diversification in internal models (see here). The objectives of the study are:
- to gain an overview of the current approaches in the market and, on best effort basis, analyse and compare the levels of diversification
- to facilitate a better understanding of modelling dependencies, aggregation and resulting diversification benefits and
- to enhance quality and convergence of supervision on diversification in internal models.
The study will be carried out in two phases to balance complexity and completeness:
- The first phase of the study, launched on 1 October, focusses on top-level risk dependencies between market, credit, life, non-life, health, and operational risks
- 15 January 2021: Deadline for insurance undertakings to submit results to their group national supervisory authority
- 22 January 2021: Deadline for national supervisory authorities to report to EIOPA
- To complete the understanding of diversification effects, in combination to the respective risk profiles, the lower level inter risk dependencies will also be assessed in the second quarter of 2021 in the second phase of the study.
All internal models, both solo and group, will be in scope of the exercise and will be contacted directly.
The exceptions to this will be 1) those based in the UK and 2) firms who use the standard formula aggregation and correlations.
Further information on the study can be found in the EIOPA presentation .