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Insurers warn IAIS against overengineering monitoring tools for assessing global liquidity trends

26-1-2022

Insurance Europe has published its response to a consultation by the International Association of Insurance Supervisors (IAIS) on the development of liquidity metrics.

Insurance Europe acknowledges the IAIS’ objective of developing a liquidity metric to act as a tool to facilitate the monitoring of the industry at a macro level. It should, however, also be clearly accepted that the microprudential supervision of liquidity risk must be based on company-specific analysis and frameworks which cannot be standardised at a global level.

For the IAIS’ global exercise, Insurance Europe supports the implementation of the proposed Exposure Approach (EA) which it considers to be the most appropriate candidate metric for global macro liquidity risk monitoring.

Insurance Europe supports the development and implementation of a single metric, assessed under a single time horizon. The design of the liquidity metric should align with its macroprudential objective and remain as simple as possible to avoid unnecessary regulatory burden.

Insurance Europe recognises the efforts made by the IAIS to develop the cashflow projection approach (CPA). As the CPA relies on a prescriptive “one size fits all” list of stress parameters which are not suitable for each individual insurer, it cannot, however, replace internally developed metrics used to manage liquidity and would create additional work and a parallel calculation without material benefits.


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