Principles for Doing Business at Lloyd's P7.6: 7.6 Objective challenge of the internal model through independent validation

The internal model is objectively challenged through independent validation. Baseline: independent validation for LCR submissions and major model changes covering all components under Solvency II; results and key assumptions tested at least annually and after major changes; the model can rank risks; minimum validation tools per Lloyd's Validation Guidance; reverse stress tests aligned to the view of risk; robust pass/fail criteria; full-scope validation under a validation policy; validation independent of development and operation, owned by the risk management function; results in a validation report submitted to Lloyd's with board-signed confirmation statements. Higher levels add a three-year cycle of deep dives, independence of reporting lines, escalation paths, board input to reverse stress tests and integration with model change.