PRA is consulting (CP4/19) on a draft supervisory statement on liquidity risk management for insurers and the consequential supersession of a legacy supervisory statement on collateral upgrade transactions. PRA proposes that the expectations in the draft supervisory statement would apply from the date of final publication, which is expected in the second half of 2019. The consultation will end on June 05, 2019.
The proposals are relevant to all UK Solvency II firms, including in respect of the Solvency II groups provisions, the Society of Lloyd’s and its managing agents, and non-directive insurers. The draft supervisory statement in the Appendix to CP4/19 sets out the expectations of PRA for liquidity risk management by insurers. These include the following:
- Key elements of an insurer’s liquidity risk management framework
- Consideration of material sources of liquidity risk to which an insurer may be exposed
- Expectations of the design and conduct of a stress testing program
- Considerations for assessing asset liquidity
- Quantitative metrics and tools for measuring and monitoring liquidity risk
- Effective liquidity contingency planning
The legacy supervisory statement SS2/13 sets out the PRA expectations from banks and insurers engaging in collateral upgrade transactions and describes a number of considerations in their management of the associated risk. Upon publication, it is proposed that the new supervisory statement would supersede the legacy SS2/13, including the expectation therein to notify PRA in advance of significant transactions. Through this proposal, PRA expects to retain the substance of the risk management components of the legacy supervisory statement.
Comment Due Date: June 05, 2019
Keywords: Europe, UK, Insurance, Solvency II, Liquidity Risk Management, Stress Testing, Liquidity Risk, CP4/19, PRA
A well-recognized researcher in the field; offers many years of experience in the real estate ﬁnance industry, and leads research efforts in expanding credit risk analytics to commercial real estate.
Previous ArticleFED Report on Feasibility of Inferring Term Rates from SOFR Futures
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).