Featured Product

    IAIS Paper Provides Guidance on Liquidity Risk Management for Insurers

    June 29, 2020

    IAIS published an 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 key topics covered in the paper include governance, liquidity risk identification, liquidity stress testing, liquidity shortfalls in stress, contingency funding plan, liquidity risk management report, and supervisory review and reporting. The paper includes guidance and examples on the following:

    • Considerations on applying liquidity risk management measures in a proportionate way 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 paper specifies that an insurer should report regularly to the supervisor on its liquidity management and planning. Moreover, an Internationally Active Insurance Group should be required to report this annually or more frequently in the event of material changes to its liquidity plan or liquidity risk profile. The report and other related information may be shared within the insurer’s supervisory college, where relevant. The insurer should ensure consistency between its liquidity risk management report and all other required supervisory documents, such as recovery and resolution plans or Own Risk and Solvency Assessments (ORSAs). However, to the extent that elements of the report are incorporated in other material, the supervisor may allow an insurer to satisfy the reporting requirement by reference to those other risk management materials and/or the ORSA. 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 to achieve the outcomes stipulated in the principle statements and standards.

     

    Keywords: International, Insurance, ICP 16, ComFrame, Proportionality, Stress Testing, Governance, Liquidity Risk, Enterprise Risk Management, Reporting, IAIS

    Featured Experts
    Related Articles
    News

    BCBS Report Examines Progress on Adoption of Basel III Framework

    BCBS published the eighteenth progress report on implementation of the Basel III regulatory framework in member jurisdictions.

    July 06, 2020 WebPage Regulatory News
    News

    BCBS Amends Guidelines on Sound Management of AML/CFT Risks

    BCBS amended the guidelines on sound management of risks related to money laundering and financing of terrorism (ML/FT).

    July 02, 2020 WebPage Regulatory News
    News

    US Agencies Finalize Amendments to Swap Margin Rule

    US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) finalized changes to the swap margin rule to facilitate implementation of prudent risk management strategies at banks and other entities with significant swap activities.

    July 01, 2020 WebPage Regulatory News
    News

    PRA Letter Sets Expectations on Approach to Managing Climate Risks

    PRA published a letter that builds on the expectations set out in the supervisory statement (SS3/19) on enhancing banks' and insurers' approaches to managing the financial risks from climate change.

    July 01, 2020 WebPage Regulatory News
    News

    EBA Guidelines on Treatment of Structural Foreign Exchange Under CRR

    EBA finalized the guidelines on treatment of structural foreign-exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR).

    July 01, 2020 WebPage Regulatory News
    News

    FSB Issues Statement on Impact of COVID-19 Crisis on Benchmark Reform

    FSB published a statement on the impact of COVID-19 pandemic on global benchmark transition.

    July 01, 2020 WebPage Regulatory News
    News

    IAIS Publishes List of Internationally Active Insurance Groups

    IAIS published the list of Internationally Active Insurance Groups (IAIGs) publicly disclosed by group-wide supervisors.

    July 01, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-9C With Respect to PPPLF and CARES Act

    FED has temporarily revised the reporting form on consolidated financial statements for holding companies (FR Y-9C; OMB No. 7100-0128).

    July 01, 2020 WebPage Regulatory News
    News

    EC Launches Consultation on Review of Solvency II Directive

    EC launched a consultation on the review of the key elements of Solvency II Directive, with the comment period ending on October 21, 2020.

    July 01, 2020 WebPage Regulatory News
    News

    ECB Consults on Supervisory Approach to Consolidation in Banking

    ECB launched a consultation on the guide that sets out supervisory approach to consolidation projects in the banking sector.

    July 01, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5430