Internal models versus standard formula: South Africa's experience

Why insurers are choosing standard formula over internal model


A central tenet of Europe’s Solvency II and similar regimes, such as South Africa’s Solvency Assessment and Management (Sam), is that insurers can opt to use an approved internal model to calculate regulatory capital rather than the regulator’s standard formula. It is something many companies argued for in the reforms and, following a great deal of time and energy expended on establishing the rules under which such models would be acceptable, it was assumed that the majority of more sophisticate

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