In accordance with the objectives of the National Association of Insurance Commissioners (ORSA processes and the vehicle to accomplish this may be through the internal model. The calculation of the ICS will most likely be very complicated but it is too soon to determine if the calculation of the capital measure under ICS will be too dissimilar from the calculation kernel under Solvency II or even the economic capital requirements under the NAIC's ORSA. With any luck, the calculation of the Solvency II. Internal Model What is an internal model? The EIOPA does not give a formal definition of what an internal model is. However, in Article 112, General Provisions for the Approval of Full and Partial Models in the Solvency II Directive, it merely states that "Member States shall ensure that insurance or reinsurance undertakings may calculate the Solvency Capital Requirements using a full or partial internal model as approved by the supervisory authorities." Much like EIOPA, the NAIC stated that quantitative risk measurement should incorporate a "range of outcomes" and that a (re)insurer should use "risk measurement techniques that are fit for purpose and that are proportional to the (re)insurer's risk profile and size." However, unlike European regulators that are required to approve a (re)insurer's internal model, the NAIC is not currently requiring pre-approval of the (re)insurer's internal model prior to its use. What will be interesting to see is how the different proposed insurance capital standard options may affect (re)insurers. Hopefully whichever option is selected, it will be a calculation that is not too dissimilar from the one done today or the one that will be done under Solvency II and NAIC ORSA. Click here to register to receive e-mail updates>>