Fears volatile model warning indicators could lead to unjustified action
The UK's Prudential Regulation Authority (PRA) is under pressure to reconsider its plan to use early-warning indicators (EWIs) in its supervisory work amid concerns that they would undermine insurers' Solvency II internal models.
Insurers fear that the capital ratios used by the indicators, designed to detect a downward drift in their capital buffers, will be extremely volatile, prompting unjustified supervisory reviews that might lead to firms having to make changes to their business models and
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