Prudential Regulation Authority Rulebook

4.1

Data used in the calculation of the technical provisions is only complete for the purpose of 12.1 in the Technical Provisions Part where both of the following conditions are met:

1. (1) the data include sufficient historical information to assess the characteristics of the underlying risks and to identify trends in the risks; and
2. (2) the data are available for each of the relevant homogeneous risk groups used in the calculation of the technical provisions and no relevant data is excluded from being used in the calculation of the technical provisions without justification.

4.2

Data used in the calculation of the technical provisions is only accurate for the purpose of 12.1 in the Technical Provisions Part where all of the following conditions are met:

1. (1) the data are free from material errors;
2. (2) data from different time periods used for the same estimation are consistent;
3. (3) the data are recorded in a timely manner and consistently over time.

4.3

Data used in the calculation of the technical provisions is only to be considered appropriate for the purpose of 12.1 in the Technical Provisions Part where all of the following conditions are met:

1. (1) the data are consistent with the purposes for which they will be used;
2. (2) the amount and nature of the data ensure that the estimations made in the calculation of the technical provisions on the basis of the data do not include a material estimation error;
3. (3) the data are consistent with the assumptions underlying the actuarial and statistical techniques that are applied to them in the calculation of the technical provisions;
4. (4) the data appropriately reflect the risks to which the firm is exposed with regard to its insurance and reinsurance obligations;
5. (5) the data were collected, processed and applied in a transparent and structured manner, based on a documented process that comprises all of the following:
   1. (a) the definition of criteria for the quality of data and an assessment of the quality of data, including specific qualitative and quantitative standards for different data sets;
   2. (b) the use of and setting of assumptions made in the collection, processing and application of data;
   3. (c) the process for carrying out data updates, including the frequency of updates and the circumstances that trigger additional updates; and
6. (6) a firm ensures that its data are used consistently over time in the calculation of the technical provisions. 

For the purposes of (2), an estimation error in the calculation of the technical provisions must be considered material where it could influence the decision-making or the judgement of the users of the calculation result, including a supervisory authority.

4.4

A firm may use data from an external source provided that, in addition to fulfilling the requirements set out in 4.1 to 4.3, all of the following requirements are met:

1. (1) the firm is able to demonstrate that the use of that data is more suitable than the use of data which are exclusively available from an internal source;
2. (2) the firm knows the origin of that data and the assumptions or methodologies used to process that data;
3. (3) the firm identifies any trends in that data and the variation, over time or across data, of the assumptions or methodologies in the use of that data; and
4. (4) the firm is able to demonstrate that the assumptions and methodologies referred to in (2) and (3) reflect the characteristics of the firm’s portfolio of insurance and reinsurance obligations.