An internal model allows a firm to calculate the SCR using its own model, methodology, assumptions etc.
All firms (IM and SF) are bound by the prescriptive nature of the risk margin calculation - a component of technical provisions. So stressing the risk margin introduces a circularity regardless of whether the firm calculates its capital on an IM or SF basis.
The risk margin could be stressed in theory - though it isn't the only consideration.
The theory would need to be balanced against other considerations: ease of practical implementation, what stressing the risk margin is seeking to achieve, changing how the risk margin is defined in the legal text, political considerations etc.
Last edited: Apr 12, 2021