IA Consults on Revised Guideline for Risk Management by Insurers
IA had published a second consultation on the revised guideline on enterprise risk management (ERM), with comment period ending on January 24, 2019. IA had conducted an initial consultation on the draft guideline on ERM in May 2018 and had received comments from the insurance industry and professional bodies. After studying the comments, IA has revised the draft guideline, for which it is seeking further consultation.
The revised draft guideline, proposed to be effective on January 01, 2020, has also taken into account the overarching principles of developing the risk-based capital regime that include compliance with the Insurance Core Principles published by IAIS; the market landscape and needs of insurance industry; and the financial health and resilience of insurance industry for the protection of policyholders. The key feedback from the initial consultation and proposed enhancements was related to the following:
- Principles-based approach
- Three-tier group-wide supervisory approach
- Introduction of “Pillar 2 Capital amount"
- Preparation of the Own Risk and Solvency Assessment (ORSA) report
- ORSA of Hong Kong branches of overseas insurers
- Prescribed scenarios in Stress and Scenario Testing in ORSA
- Regulatory capital requirements referred to in the ORSA Report
- Relief measures in early years of implementation of the Guideline
This second consultation is a critical step toward the expected finalization of the guideline in 2019. HKMA strongly encourages insurers to execute gap analysis, implement action plans to enhance their ERM framework, and put in place an ORSA as soon as is practical. The insurers facing practical issues with regard to the compliance with the guideline should contact their case officers and demonstrate to IA the practical difficulties encountered and formulate an action plan for phased implementation within a reasonable timeframe.
Related Links
Comment Due Date: January 24, 2019
Effective Date: January 01, 2020 (Proposed)
Keywords: Asia Pacific, Hong Kong, Insurance, ERM, ORSA, Regulatory Capital, Pillar 2, Risk-based Capital Regime, ICP, IA
Featured Experts
Jing Zhang
Quantitative researcher; credit risk modeling and analysis expert; in-demand industry speaker; published author and CCAR authority
Amnon Levy
Financial researcher; authority in credit portfolio management and AI/ML, risk-based pricing, climate and credit, CECL/IFRS 9; credit and ALM
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Related Articles
PRA Consults on Implementation of Certain Provisions of CRD5
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA Report Identifies Key Financial Stability Risks for Insurers
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA Publishes Risk Dashboard for First Quarter of 2020
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA Issues Updates on Stress Test Exercise for Banks in EU
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA Proposes Guidance Related to Matching Adjustment under Solvency II
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS Issues Guidance on Dividend Distributions by Banks
MAS published a statement guidance on dividend distribution by banks.
APRA Updates Guidance on Capital Management for Banks
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB Report Reviews Macro-Prudential Framework and Tools in Germany
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA Urges Firms to Finalize Preparations for End of Brexit Transition
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB on Operational Continuity in Resolution and FMI Contingency Plans
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.
