UK life insurers are making credit risk models simpler to use in the run-up to Solvency II, according to Towers Watson's annual risk calibration survey.
The actuarial consultancy says fewer insurers are reporting separate stresses for spread and default and migration risk on their asset holdings.
This drive for increased efficiency is at odds with a trend in the past few years to make credit models more detailed, said Tim Wilkins, senior consultant at Towers Watson.
"We are seeing some firms pulling back from that, as they struggle to run those models fast enough to make them useful for steering the business," he added.
This trend goes hand-in-hand with the gradual strengthening of the stresses used, the survey shows.
However, several firms are considering how to extend credit models to cover illiquid assets, which account for a growing share of their asset portfolios in the low interest rate environment.
Across credit and other risks, some were forced to tighten up their calibrations under pressure from the Prudential Regulation Authority (PRA), as part of internal model discussions. In other cases, firms have taken the initiative or acted in response to market changes.
"Some insurers looked at interest rate volatility over recent years, where there have been a few 1-in-200 year events, and realised they could not really square those with their existing models, so they have strengthened the risk calibrations," Wilkins said.
The survey was carried out in the second and third quarters of the year. Nineteen UK-based life insurers participated, representing the majority of life firms that are applying to use an internal model from January 2016.
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