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Principle 7: Capital

Managing agents should ensure syndicates Solvency Capital Requirement (SCR) appropriately reflects their risk profile and is calculated using a SII compliant internal model.


To support this, managing agents should ensure their syndicates:

Maintain an internal model which captures all material risks that the syndicate is exposed to​

​Use modelling assumptions which are realistic and justifiable, methodology which is adequate and all material limitations are understood

Have strong feedback loops joining the business and the model​

Demonstrate robust governance and understanding of the model. This includes adequate understanding and challenge at senior management level.

Implement changes to the model which are reasonable and justified and their impact on the SCR adequately explained​​

Conduct objective challenge of the internal model through independent validation

Below are some of the frequently asked questions about this Principle, including the questions that were asked in the Technical Briefing session(s).

If you have any further questions, please reach out to Oversight.Framework@lloyds.com

No it doesn’t. Most syndicates will receive some feedback from us. We will monitor the number of feedback points we send to syndicates and flag those that consistently have a large number, but getting a few feedback points doesn’t (on its own) mean a syndicate is below expectation.

Yes, that could potentially be a way to mitigate last minute changes in the business plan

We have a plan for who we will carry out deep dives for this year. The majority of these syndicates will have been informed about this in their oversight letter in December, the exception being where we didn’t know at that point that a syndicate was going to be submitting a Major Model Change this year. We have now informed all syndicates via email who we will deep dive this year and confirmed time frames. We don’t have any capacity to do additional deep dives. We don’t currently have a plan for the following years because on the whole we try to align the deep dives with a MMC review, and we don’t yet know which MMCs are planned for next year. Where we have capacity beyond that we will be prioritising (1) material syndicates that haven’t yet had a deep dives (2) syndicates with material issues (3) syndicates of lower materialities that we haven’t carried out a Medium SCR or MMC review in recent years. We will inform syndicates in their oversight letters if a deep dive is planned.

No! Loadings are the primary quantitative indicator, however there are a large number of qualitative indicators and the deep dives we do will be a key factor in assessing syndicates performance against expectations. We will continue to clarify to syndicates exactly what they need to do to address any loadings, meaning syndicates should be able to address these in a timely manner to improve their assessed performance against expectations.