On 29 June, IAIS published the Application Paper on Liquidity Risk Management. Insurance Europe submitted its comments by the deadline of 20 January.
You can find the text of the Application Paper here and the resolution of the public consultation, with the comments received by the IAIS here.
The comments made by Insurance Europe were noted by the IAIS and in some cases, the text was amended to reflect them, with regards to:
- liquidity stress testing, which should focus on liquidity related components and not expand to other areas like solvency or profitability;
- the suggestion that stress-testing exercises should not assume borrowings from off-balance sheet sources, which was overly limiting, and that there should have been a distinction between uncommitted and committed lines of credit;
- the fact that it is nearly impossible for an insurance company to assess the systemic risk that it represents to the wider financial system, as it lacks access to other confidential financial institutions data, reported only to supervisors, to estimate its own contribution to systemic risk;
- the fact that being part of an insurance group can prove beneficial to absorb local or asymmetric liquidity stresses and access market funding in a timely manner, and that being part of a group does not equate to “additional challenges”.