Positioning the internal audit function within the Solvency II framework
Throughout its fundamental review of the capital adequacy regime of the European (re)insurance industry –Directive 2009/138/EC on the taking-up and pursuit of the business of insurance and reinsurance as amended, entering into force on 1 January 2016– will introduce revised risk management and governance standards.
These revised standards will cause the system of governance of (re)insurance organisations to evolve with the implementation of mandatory key functions, adequate articulation of which is crucial to provide for sound and prudent management of the business.
Of the key functions enforced by Solvency II, the internal audit function intends to remain entirely responsible for the examination and evaluation of the adequate functioning and effectiveness of internal control systems and all other elements of the system of governance, along with the evaluation of whether such internal control system remains sufficient and appropriate for the organisation’s business.
While it is expected that the role and objectives of the internal audit function will not deviate from its primary focus in the Solvency II framework (an assurance activity for those charged with governance of the organisation, designed to add value and improve operations), some key principles are to be properly followed during the implementation.
Inside magazine issue 7, February 2015
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