Regulatory Procedure - Submission process for Licensees seeking approval to use an Internal Capital Model to calculate the Prescribed Capital Requirement

Summary

This is a CIMA regulatory procedure (dated May 2016) describing the practical steps an insurance licensee must follow if it wants CIMA's approval to use its own Internal Capital Model (ICM), rather than the standard regulatory formula, to calculate its Prescribed Capital Requirement (PCR) under the Insurance Law, 2010 and the related Capital and Solvency regulations. It should be read together with CIMA's separate Statement of Guidance on ICM approval.

The procedure sets out three stages, each requiring specific submissions detailed in Schedules 2 and 3, such as cover letters, Board declarations, compliance statements, documentation, independent validation reports, reporting templates and application fees.

• Initial Review Process: A preparatory, interactive stage where the licensee submits documentation and presentations so CIMA can gauge readiness.
• Formal Application Process: CIMA decides whether to approve use of the ICM and sets any conditions.
• Post-Approval Monitoring: Ongoing oversight once the ICM is approved for use.

The document applies to insurance licensees (particularly Class B, C and D insurers under the relevant capital regulations) that wish to use an ICM, and to their Boards of Directors and, where applicable, insurance managers. It does not change the underlying capital requirement itself but governs the process, cost allocation (fees are borne by the licensee and are non-refundable), and continuing obligations once an ICM is approved, including annual reporting and breach notification.

Key obligations

• A Licensee must obtain Board Declaration signed by at least two Directors for both the Initial Review and Formal Application submissions.
• The Board of Directors must formally acknowledge communication of ICM review results, including initial review feedback, conditions, and post-approval reporting requirements.
• A Licensee must continue to meet the PCR under the standard prescribed method until the Authority formally approves use of the ICM; it may only use the ICM after receiving formal acknowledgement of approval.
• A Licensee must submit all items required under Schedule 2 (cover letter, Board declaration, compliance statements, ICM presentation and demonstration, documentation, independent validation report, and application fee payment) for the Initial Review Process.
• A Licensee must submit all items required under Schedule 3 (cover letter, Board declaration, compliance statements, additional information, reporting templates, documentation, and application fee payment) for the Formal Application Process, and must be fully compliant with all compliance statements before submitting.
• The Licensee is responsible for the full cost of the ICM review (administrative and third-party review fees), which are non-refundable even if the application is withdrawn or not approved.
• If the Licensee withdraws from the ICM review process, it must provide the Authority written notice of withdrawal together with a rationale.
• Once approved, the Licensee must report the results of the ICM as part of its annual return, using the reporting format determined by the Authority.
• Once approved, the Licensee must submit a validation report to the Authority as part of the annual return, current and coinciding at a minimum with the Licensee's financial year end.
• Any breach of conditions attached to ICM approval must be reported to the Authority within two weeks of the breach occurring.
• The Authority requires the Licensee to advise it of any changes to its business or ICM occurring between the Initial Review and Formal Application that fall outside the agreed action plan.

Applies to

insurance licensees under the Insurance Law, 2010, Class B, C and D insurers, insurance managers

Deadlines

• within five business days of receipt: CIMA will formally acknowledge receipt of an Initial Review submission.
• within five business days of receipt: CIMA will formally acknowledge receipt of a Formal Application submission.
• within two weeks of the occurrence of the breach: Licensee must report to the Authority any breach of conditions attached to its ICM approval.
• coinciding at a minimum with the Licensee's financial year end (annually, as part of the annual return): Licensee must submit a current validation report and report ICM results to the Authority.