Prudential Regulation Authority Rulebook

6.1

A firm with internal model permission must not change its internal model otherwise than in accordance with the internal model change policy that is covered by the firm’s internal model permission.

[Note: Art. 115 of the Solvency II Directive]

6.2

A firm’s internal model change policy must include a specification of minor and major changes to the internal model and, to the extent a firm applies model limitation adjustments within the internal model for which it has internal model permission, an explanation of governance arrangements for their application, including where they are specified as minor and major changes and the reasons they are specified as such.

6.3

A firm with internal model permission must not:

1. (1) make any major change to its internal model; or
2. (2) make any change to its internal model change policy, other than those allowed by 6.4;

without obtaining the prior approval of the PRA to vary the firm’s internal model permission.

[Note: Art. 115 of the Solvency II Directive]

6.4

A firm with internal model permission may make changes to its internal model change policy which are administrative in nature, and do not:

1. (1) make substantive changes to the process set out in the internal model change policy; or
2. (2) affect the outcome or scope of the internal model change policy.

6.5

A firm that applies to the PRA for prior approval to vary its internal model permission in order to make any major change to its internal model or to make a change to its internal model change policy must apply in accordance with the procedures set out in 3 to 5 for obtaining internal model permission.

6.6

For the purpose of 6.5, if a firm applying to the PRA has an internal model permission that modifies any of the internal model requirements applicable to that firm, it must also submit documentary evidence for the purposes of 3.1(1) or (2) by reference to the unmodified internal model requirements, and the firm must also:

1. (1) confirm, in accordance with 3.1(1); or
2. (2) explain, in accordance with 3.1(2),

by reference to the unmodified internal model requirements.

6.7

This rule modifies 6.3(2) and 6.5 for a transitional period following 31 December 2024 as follows:

1. (1) A firm that applies model limitation adjustments within the internal model for which it has internal model permission may, until 31 December 2026, make a change to its internal model change policy solely in order to document procedures for applying, reviewing and removing those model limitation adjustments without the prior approval of the PRA for a variation of its internal model permission.
2. (2) A firm that makes changes of a description permitted in (1) to its internal model change policy must apply to the PRA before 31 December 2026 to vary its internal model permission in order to reflect those changes to its internal model change policy in accordance with the procedures set out in 3 to 5 for obtaining internal model permission.