Model validation process

1. The model validation process shall apply to all parts of the internal model and shall cover all requirements set out in Articles 101, Article 112(5), Articles 120 to 123 and Article 125 of Directive 2009/138/EC. In the case of a partial internal model the validation process shall in addition cover the requirements set out in Article 113 of that Directive.

2. In order to ensure independence of the model validation process from the development and operation of the internal model, the persons or organisational unit shall, when carrying out the model validation process, be free from influence from those responsible for the development and operation of the internal model. This assessment shall be in accordance with paragraph 4.

3. For the purpose of the model validation process insurance and reinsurance undertakings shall specify all of the following:

(a) the processes and methods used to validate the internal model and their purposes;

(b) for each part of the internal model, the frequency of regular validations and the circumstances which trigger additional validation;

(c) the persons who are responsible for each validation task;

(d) the procedure to be followed in the event that the model validation process identifies problems with the reliability of the internal model and the decision-making process to address those problems.

4. As part of the model validation process insurance and reinsurance undertakings shall assess the quality and independence of the validation. In the assessment of independence, undertakings shall take all of the following into account:

(a) in case of an internal validation process, the responsibilities and reporting structure of the persons involved in the process,

(b) in case of an external validation process, the remuneration structure of the persons, including where applicable their employees or other persons acting on their behalf, who are involved in the process and any other mandates of these persons relating to the insurance or reinsurance undertaking.