In a speech today on "The new approach to insurance regulation and the implementation of Solvency II", the FSA said:
"Supervisors will be expected to be able to answer 30 questions about the firms which they supervise; these answers will put them in a position to be confident that they understand
- whether a firm is financially sound;
- whether the business model works and is reasonably robust;
- what the vulnerabilities of the business model are;
- what stress testing (including reverse stress testing) has been carried out – what would break the company; and
- what the potential is for harm to be caused by failure of the firm."
The answers to the 30 questions doubtless won't fit on an A5 checklist - they may well be very long, highly detailed and well-analysed - but you can't help wondering if this was really the best way to reassure us about PRA's new proactive, interventionist, judgment-based supervision.
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