Europe’s Reinsurance Advisory Board makes case for internal models

A group of Europe’s largest reinsurers, the Insurance Europe Reinsurance Advisory Board (RAB), has published an overview of the benefits of insurers’ use of internal models, essentially making the case for their use.

The report, called ‘Internal models: a reinsurance perspective’ argues that their use has a number of benefits including making the risk profile of insurers more transparent and allowing risk to be analysed in more detail, so that the output of the models more closely reflects insurers’ risk profiles. It also means insurers can have more meaningful discussions with supervisors, the report argues.

The RAB is represented at CEO level by seven major reinsurers: Gen Re, Hannover Re, Lloyd’s of London, Munich Re, Partner Re, Scor and Swiss Re, with Insurance Europe providing the secretariat.

Ulrich Wallin, CEO of Hannover Re and chair of the RAB, said: “This publication addresses criticisms that have been levelled against internal models by supervisors and explains why, for insurers, internal models remain the most accurate measure of their risks, the best driver of good risk management and the most appropriate basis for comparing risks between companies.”

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