Prudential Regulation Authority Rulebook

9.1

When firms have managed the immediate issues associated with a MTE, the PRA would expect firms to consider what longer-term lessons might be drawn from the event, to improve firms’ future governance and risk management arrangements and to improve their preparation for similar future events. Some factors that the PRA would expect a firm to consider include (among other things):

• how its actual loss experience (e.g. in capital models, aggregate exposure management) compared with expected or modelled experience prior to the MTE, and what lessons might be drawn for the robustness of previous assumptions, modelling techniques, processes and controls;
• the ease with which initial loss estimates could be assembled following the MTE, how loss estimates developed over time, and whether changes might be made to systems, internal processes or data collection to improve the timeliness or accuracy of initial estimates for future similar events;
• whether policy definitions and terms and conditions performed as expected or whether changes might need to be made to ensure contracts operated as all parties intended;
• whether its reinsurance programme responded as expected or intended, and whether amendments are required in future including in the event of a change in the firm’s risk appetite;
• whether its liquidity arrangements responded as expected or intended, and whether amendments are required in future to allow for unforeseen events such as delays in reinsurance recoveries;
• whether its medium-term business plans, risk appetites, or ORSA remain appropriate in the light of any changes to business profile or future capital position; and
• whether any crisis management, disaster recovery or business continuity arrangements invoked by the firm operated as expected during the event, and whether any changes might be made to improve the firm’s response to future similar events.