IAIS is seeking feedback on the draft application paper on liquidity risk management for insurers. As part of the holistic framework for systemic risk in the insurance sector, IAIS enhanced the enterprise risk management requirements in ICP 16 to more explicitly address liquidity risk. The paper provides guidance on supervisory material related to liquidity risk management in the Insurance Core Principles (ICPs) and ComFrame. The guidance relates to the material in ICP standards 16.8 and 16.9 (ICP 16 on enterprise risk management, for solvency purposes) and ComFrame 16.9.a–16.9.d. The comment period for the application paper on liquidity risk management ends on January 20, 2020.
The key topics covered in the paper include governance, liquidity stress testing, liquidity portfolio, contingency funding plan, and liquidity risk management report. The paper includes guidance and examples on the following:
- Considerations on the proportional application of liquidity risk management measures and the ways that supervisors may tailor requirements.
- Detailed components of the four elements for “more detailed risk management processes” in ICP standard 16.9: liquidity stress testing, maintenance of a portfolio of unencumbered highly liquid assets, a contingency funding plan, and the submission of a liquidity risk management report to the supervisor.
- Integration of liquidity risk into the enterprise risk management framework for insurers, as described in ICP Standard 16.8, including recommendations for governance.
The application paper should be read in the context of the proportionality principle, which acknowledges the flexibility among supervisors to tailor the application of supervisory requirements and supervision to achieve the outcomes stipulated in the principle statements and standards. Application papers provide additional material related to one or more ICPs, ComFrame, or global systemically important insurer policy measures, including examples or case studies that help in the practical application of supervisory material.
Comment Due Date: January 20, 2020
Keywords: International, Insurance, ICP 16, ComFrame, Proportionality, Stress Testing, Governance, Liquidity Risk, Enterprise Risk Management, IAIS
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