IA of Hong Kong issued templates and technical specifications for the second quantitative impact study (QIS 2) 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. Authorized insurers have been requested to participate in the QIS 2 and submit the completed template(s) by November 30, 2018.
IA released two different packages for QIS 2—one for insurers carrying on long-term business and the other for insurers carrying on general business. Composite insurers should use both packages in respect of long-term and general business. Each package contains a template collecting quantitative and qualitative data, 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. IA aims to collect sufficient and relevant data from the matching adjustment package to further analyze and formulate a set of eligible criteria in applying matching adjustment as well as to determine the adjusted spread methodology. Matching adjustment is an alternative discounting approach that reflects the assets held by individual companies based on their policies for asset and liability management.
QIS 2 is important and will offer a holistic view of the solvency position of individual insurers and the insurance industry. This would form a basis for IA to move forward to the next step of moderation exercise and to perform further testing in the third QIS. While developing the RBC regime, IA is mindful of the overarching objectives, including alignment with international standards and practices, resilience of the insurance industry for the protection of policyholders, and maintaining competitiveness of the Hong Kong insurance industry. IA has maintained close dialog with the insurance industry. Taking into account the industry feedback, IA is open to explore test options, for example, on discount rate of the long-term insurance liabilities. IA has also reflected on the feedback in certain areas in QIS 2, for example, alignment with the Hong Kong Financial Reporting Standard (HKFRS) 17 on insurance contracts to a certain extent and the proposed stress levels of certain risks. This would be a continuous process of moderation exercise, aiming to strike a balance toward a pragmatic and effective approach.
Comment Due Date: November 30, 2018
Keywords: Asia Pacific, Hong Kong, Insurance, Risk-based Capital Regime, QIS 2, HKFRS 17, Matching Adjustment, IFRS 17, IA
Previous ArticlePentti Hakkarainen of ECB on Importance of Implementing EDIS in EU
EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).
EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.
BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.
PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).
FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.
FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.
Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.