EIOPA reviews internal model harmonisation across EU

EIOPA is stepping up its scrutiny of how national supervisors assess and approve Solvency II internal models, with a clear push to align methodologies and outcomes across the EU. For insurers running or developing internal models, this means greater visibility of how their approach compares with peers and less room for divergent national practices.

This increased scrutiny brings closer involvement of EIOPA in model approval and change processes, especially for complex or cross‑border groups, lengthening challenge but potentially clarifying expectations. It also creates a stronger link between internal model governance and group‑wide risk management, as supervisors converge on common assessment criteria.

To deliver this, EIOPA engages directly with national supervisory authorities to understand, monitor and provide feedback on their internal model supervisory approaches, with the explicit intention of improving quality and European consistency.

The Board of Supervisors (BoS) supports EIOPA's supervisory convergence plan and acknowledges the comprehensive set of objectives and activities established to achieve it, which includes work on internal models. This endorsement gives EIOPA political backing to challenge divergent national practices and to promote common standards in how internal models are reviewed and approved.

EIOPA's focus on cross‑border business further reinforces the need for harmonised internal model supervision, as groups increasingly rely on a single risk and capital framework across multiple jurisdictions. The BoS specifically welcomes EIOPA's ongoing focus on cross‑border business and its cross‑border cooperation platforms, which provide a forum to address cases with possible detriment to consumers where inconsistent supervision could undermine policyholder protection.

Companies that decide to use internal models are subject to initial approval following prescribed processes from supervisory authorities, which assess both methodology and governance. EIOPA provides technical assistance for the assessment of internal model applications, on request and in case of need, acting as a second‑line reviewer for complex or contentious cases. This assistance can shape how national supervisors interpret approval criteria, particularly where there is limited local experience with sophisticated market or credit risk modelling.

Internal Model Comparative Studies and benchmarking

Internal Model Comparative Studies (IMCS) are a central tool in EIOPA's push for supervisory convergence on internal models. EIOPA states that these studies contribute to its objective of supervisory convergence regarding Solvency II internal models, by comparing modelling approaches and outputs across participating firms and jurisdictions.

The MCRCS allows EIOPA and supervisors to benchmark how different internal models capture market and credit risk, highlighting where assumptions or calibrations materially diverge from peers. A revision of this 2017 Opinion was deemed necessary, signalling that EIOPA sees scope to update and tighten the framework for internal model assessment in light of experience and convergence work.

For insurers, it points to a future in which internal model approval and ongoing review are more explicitly benchmarked against EU‑wide standards rather than purely national interpretations.