These will serve as a tool to facilitate the IAIS’ monitoring of the global insurance sector’s liquidity risk and for the IAIS to assess insurers’ liquidity exposure from a macroprudential perspective, which may be critical as insurers have been exposed to liquidity shortfalls in previous crises.
Today, the International Association of Insurance Supervisors (IAIS)
published liquidity metrics as an ancillary indicator for its Global
Monitoring Exercise (GME).
The liquidity metrics
will serve as a tool to facilitate the IAIS’ monitoring of the global
insurance sector’s liquidity risk and for the IAIS to assess insurers’
liquidity exposure from a macroprudential perspective, which may be
critical as insurers have been exposed to liquidity shortfalls in
previous crises.
The liquidity metrics form one part of the IAIS’ overall approach to
the assessment and mitigation of liquidity risk in the insurance sector.
- With respect to assessing liquidity risk, the IAIS’ GME covers
insurance sector trends and risks, including liquidity risk, based on
data collected from approximately 60 of the largest international
insurance groups (individual insurer monitoring or IIM) and aggregate
sector-wide data from supervisors across the globe (sector-wide
monitoring or SWM), covering over 90% of global written premiums.
- With respect to mitigating liquidity risk, the IAIS’ global
standards include supervisory requirements on insurers to adequately assess, manage and disclose their liquidity risk, including in stress situations. The IAIS has also developed practical guidance material on the supervision of liquidity risk.
The new ancillary indicator will provide an additional perspective on
liquidity risk within the GME but is not intended to replace any
current indicator of the IIM methodology. Because of the complexity of
monitoring liquidity risk of insurance groups based on any single
indicator and the inherent limitations of any single approach given the
many dimensions of liquidity risk to consider, the IAIS has developed
multiple liquidity metrics for use in the IIM.
The metrics were developed as part of a multi-year project, which has benefited from two public consultations
and intensive testing through the IIM data collections. In addition to
the document describing the liquidity metrics, the IAIS has published
the resolution of comments
received in the public consultation on Liquidity Metrics – Phase 2. The
IAIS will continue to assess and refine the liquidity metrics going
forward.
A virtual public background session including information on the
liquidity metrics will be held on 10 January 2023, 13:00-15:00 CET. Click here to register.
Document links:
IAIS
© IAIS - International Association of Insurance Supervisors
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