Principles for Doing Business at Lloyd's P7.2: 7.2 Realistic, justifiable assumptions, adequate methodology and understood limitations

Modelling assumptions are realistic and justifiable, methods adequate and material limitations understood. Baseline: data and assumptions consistent with technical provisions; data limitations documented; IT and contingency described; expert judgement where data is limited; external data supplements own data; external models and data explained, limitations communicated to the board, alternatives considered, validated and use-tested; assumptions documented, challenged, sensitivity-tested and justified with a re-parameterisation process; methodology reflecting the risk and generally accepted practice; out of model adjustments governed; limitations identified, communicated, quantified and monitored. Higher levels add benchmarks, type 2 sensitivity tests, adjustment of vendor models to own view of risk and triggers for re-parameterisation.