IA of Hong Kong issued templates and technical specifications for the third quantitative impact study (QIS 3) on the development of risk-based capital (RBC) regime. Additionally, IA released a package of template and technical specifications on matching adjustment for insurers conducting long-term business. IA has also published template and technical specifications related to Key Insurance Risks and Trends (KIRT) Survey. Authorized insurers have been requested to participate in the QIS 3 and the KIRT survey and submit the completed template(s) by November 29, 2019.
The QIS 3 package contains a template for submission and a template for reference, technical specifications for the completion of the corresponding template, annex on discount rates, and a question and answer template. IA also finalized the package of template and technical specifications on matching adjustment for insurers carrying on long-term business. The matching adjustment package stipulates the requirements in determining the discount rates for the valuation of insurance liabilities. Matching adjustment aims to reflect the assets held by individual companies in supporting the insurance liabilities and their asset and liability management practices.
The QIS 3 package represents the collaborative effort of IA and the industry. In developing the QIS 3 package, IA has worked on the industry data collected from the second quantitative impact study (QIS 2) and engaged representatives of the Hong Kong Federation of Insurers and the Actuarial Society of Hong Kong for a technical discussion, which includes the approach for moderation and re-calibration. In addition, the QIS 3 package has taken into account international standards and practices, particularly the global Insurance Capital Standard (ICS) being developed by the IAIS. QIS 3 is contributory to forming the data set for the insurance industry in Hong Kong. The result would form the basis for IA to finalize the set of rules on Pillar 1 capital requirement, after which a consultation process is expected to be carried out in 2020.
For the annual KIRT survey, HKMA will transmit only aggregated industry data set to IAIS. IAIS plans to annually conduct a global monitoring exercise in the form of KIRT survey to collect relevant data, with the goal of developing a holistic framework for systemic risk in the global insurance sector. The data will enable insurance supervisors to identify and address the potential buildup of systemic risk in the insurance sector.
Comment Due Date: November 29, 2019
Keywords: Asia Pacific, Hong Kog, Insurance, Risk-based Capital Regime, QIS 3, Matching Adjustment, Systemic Risk, KIRT Survey, IAIS, IA
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
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