Market Insights Report: Capital Modelling and Validation
Insurance consulting Capital modelling and validation Insurance market insight Governance Risk
With continued economic uncertainty, emerging risk pressures, and growing regulatory expectations, it’s no surprise that efficiency, governance, and model change planning are high on the agenda.
Our latest Market Insights Report explores how insurers are navigating today’s capital modelling and validation challenges and why embracing automation is key to unlocking efficiency and enabling deeper analysis. We have also included practical insights throughout, alongside examples of good practice and areas where we see real potential for significant efficiency savings and additional business insight.
Highlights
- Shifting focus areas: Underwriting risk, market risk and dependencies were the most common areas of planned focus over the next 12 months, with firms also prioritising improvements in efficiency, reporting, and emerging risks like climate, cyber, and geopolitical uncertainty.
- Blended resourcing models: around two-thirds of firms use a blend of resource to deliver validation, but approaches can vary significantly by firm. Larger firms rely more on Line 1 teams, while medium-sized firms lean more on external providers.
- Model change outlook: 35% of firms have no major model changes planned in the next two years. However, 27% expect significant updates driven by changes in risk profile – highlighting the need for clear planning, challenge, and governance.
- Board and regulatory engagement: Most boards are moderately involved in model oversight, with larger firms showing more direct board challenge. Meanwhile, 69% of respondents agree that regulatory expectations are clear and reasonable.
Market Insights Report: Capital Modelling and Validation
Read the reportIf you’d like to explore any of the topics in more detail, benchmark your current approach, or explore our latest thinking, please don’t hesitate to get in touch.
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Some of our key findings
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Resourcing
43%Around two-thirds of firms use a blend of resources, with 43% drawing on external support and 63% involving their capital teams. -
Reporting
63%63% said reporting is the most resource-intensive part of validation, followed by analysis of change (43%) and sensitivity testing (41%). -
Governance and oversight
68%68% have reviewed their validation framework within the past three years, including 30% in the last year – broadly aligning with a three-year cycle post-Solvency II implementation.
Validation is no longer just a compliance exercise – it’s a key pillar of how firms understand, govern, and improve their capital models. This year’s review shows that while firms are working hard to meet expectations, there are real opportunities to improve efficiency, embrace automation, and ensure emerging risks are appropriately captured.
Cat Drummond Partner
