EIOPA issued a statement supporting views of ESRB on the importance of improving the monitoring of liquidity risks in the insurance sector. Earlier, in a letter addressed to the EIOPA Chair, ESRB strongly encouraged EIOPA and its members to promptly finalize and operationalize the framework for monitoring of liquidity risks in the insurance sector. In its statement, EIOPA highlights that, as a response to COVID-19 crisis, it has already developed and put in place a proportionate framework to enhance the nature and the consistency of the information collected on liquidity risks. Until now, there is no evidence of the materialization of liquidity risks in the insurance sector.
The ESRB letter, states that, to date, there has been a lack of consistent data for assessing the magnitude of potential liquidity risks in the insurance sector and the related financial stability risks. Therefore, supervisors may not be in a position to judge with confidence the scale of potential liquidity pressures in the future and the potential financial stability implications of a crystallization of such liquidity risks. In the past, ESRB has flagged that the Solvency II review presents an opportunity to better enable supervisors to address liquidity risk of insurers with a vulnerable liquidity profile. Additionally, ESRB judges that, in the near term, priority should be given to improved monitoring of liquidity risks in the insurance sector, to enhance Europe’s preparedness to respond to potential future shocks that could lead to a deterioration in financial stability conditions.
In response, this recent statement from EIOPA clarifies that, as part of the Solvency II Review, EIOPA has consulted on concrete proposals to reinforce the macro-prudential dimension of the regime; this includes elements to strengthen the tools available to assess and monitor liquidity risks. The proposals will be assessed in the coming months in face of the COVID-19 evidence. The statement adds that EIOPA will continue to contribute to the ESRB work to support the stability of the insurance sector and its contribution to the overall stability of the financial system.
Keywords: Europe, EU, Insurance, Solvency II, Liquidity Risk, Financial Stability, COVID-19, Solvency II Review, ESRB, EIOPA
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleBoE and PRA Publish Annual Reports for 2019-20
The Australian Prudential Regulation Authority (APRA) released the final Prudential Practice Guide on management of climate change financial risks (CPG 229) for banks, insurers, and superannuation trustees.
The European Council adopted its position on two proposals that are part of the digital finance package adopted by the European Commission in September 2020, with one of the proposals involving the regulation on markets in crypto-assets (MiCA) and the other involving the Digital Operational Resilience Act (DORA).
The Prudential Regulation Authority (PRA) is proposing, via the consultation paper CP21/21, to apply group provisions in the Operational Resilience Part of the PRA Rulebook (relevant for the Capital Requirements Regulation or CRR firms) to holding companies.
The European Commission (EC) has adopted a package of measures related to the Capital Markets Union.
The European Banking Authority (EBA) published the final report on draft regulatory technical standards for the calculation of risk-weighted exposure amounts of collective investment undertakings or CIUs, in line with the Capital Requirements Regulation (CRR).
The Board of Governors of the Federal Reserve System (FED) published a report that summarizes banking conditions in the United States, along with the supervisory and regulatory activities of FED.
The Australian Prudential Regulation Authority (APRA) recently completed two pilot initiatives in its 2020-2024 Cyber Security Strategy, which was published in November 2020.
The Basel Committee on Banking Supervision (BCBS) published further information related to its 2021 assessment of global systemically important banks (G-SIBs), with additional details to help understand the scoring methodology.
The Financial Accounting Standards Board (FASB) is consulting on an Accounting Standards Update and the associated taxonomy improvements for requirements on troubled debt restructurings and vintage disclosures under the credit losses standard (for financial instruments) topic 326.
US Agencies issued a statement that summarizes the work undertaken during the interagency policy sprints focused on crypto-assets and provides a roadmap of future work related to crypto-assets.