Adequate, applicable and relevant actuarial techniques

Actuarial and statistical techniques shall only be considered adequate, applicable and relevant for the purposes of Article 121(2) of Directive 2009/138/EC where all of the following conditions are met:

(a) the techniques are based on up to date information and progress in actuarial science and generally accepted market practice are taken into account in the choice of the techniques;

(b) the insurance or reinsurance undertaking has a detailed understanding of the economic and actuarial theory and the assumptions underlying them.

(c) the outputs of the internal model indicate relevant changes in the risk profile of the insurance or reinsurance undertaking;

(d) the outputs of the internal model are stable in relation to changes in the input data that do not correspond to a relevant change of the risk profile of the insurance or reinsurance undertaking;

(e) the internal model captures all the relevant characteristics of the risk profile of the insurance or reinsurance undertaking;

(f) the techniques are adapted to the data used for the internal model;

(g) the outputs of the internal model do not include a material model error or estimation error; wherever possible, the probability distribution forecast shall be adjusted to account for model and estimation errors;

(h) the calculation of the outputs of the internal model can be set out in a transparent manner.