We have recently performed and provided subject matter expertise to the independent validation of the capital model built by a large Lloyd’s managing agent. The review included detailed analysis of current documentation and results, discussions with management and piecing all information together to give a clear detailed description of the model strengths and any possible limitations. This is the second annual review of the internal capital model we have performed for our client, with the positive result of transitioning from an “amber” to a “green” Lloyd’s rating.
In our 2013 review, limitations within the model were identified and documented, with escalations and remedial action scheduled for the future based on the materiality of limitation. The report Dynamo compiled listed all limitations with several suggestions on how to improve or fully eliminate the limitation. This resulted in an “amber” rating from Lloyd’s which showed that good structures were in place there was some space for improvement.
In our 2014 review, most of the identified limitations in the previous validation cycle had been either reduced to insignificant levels or in some instances completely eliminated by our clients’ actuarial and risk functions. We identified more subtle and smaller limitations in our recent validation review. The independent validation report we helped produce demonstrated our client had a thorough knowledge of their internal model structures and nuances, including all the correct regulatory requirements, resulting in a Green flag.