The CRO Forum believes that the liquidity premium is a fundamental part of the economic valuation of insurance contracts. We support the underlying principles agreed by the Task Force, and the formulaic approach for deriving the liquidity premium adopted in QIS5.
In this paper we discuss the idea behind currency risk. If the guidance for the required capital calculation for FX risk is based on a shock applied to the Net Asset Value of the entities in their respective reporting currencies, then this can create hedge incentives that endanger the solvency of the group and hence policyholder benefits.
In this press release, Representatives of the European insurance industry have urged the European Commissioner for the Internal Market and Services, Michel Barnier, to ensure that the overly conservative and prescriptive elements still contained in the draft implementing measures for the forthcoming EU regulatory regime, Solvency II, are urgently addressed.
