Assessing the appropriateness of the Solvency II standard formula

The assessment of the appropriateness of the standard formula is a key part of the Own Risk and Solvency Assessment (ORSA) process under Solvency II. As part of this assessment, (re)insurers must identify any material deviations in risk profile compared to the assumptions underlying the standard formula. This briefing note outlines what is expected under this assessment, including the key challenges such as the treatment of risks that are not reflected in the standard formula, the qualitative assessment and what is required if a material deviation is identified.