The UK Prudential Regulation Authority's statement on model risk management for banks and insurers.
Effective from 2024, SS1/23 establishes five principles for MRM: Model Definition, Governance, Development/Testing, Independent Validation, and Model Usage. It explicitly includes AI/ML models, requiring firms to have a board-approved MRM framework and a comprehensive model inventory that tracks model complexity and risk.
A UK insurer inventories an AI model used for dynamic pricing and performs an independent validation to satisfy SS1/23, ensuring the model's drift is monitored and reported to the board.
