More than ten years on from the global financial crisis, liquidity risk remains an important theme for the financial services industry, including for re/insurers. The crisis triggered changes in market dynamics. The paper highlights the unintended consequences of the monetary and regulatory response to the GFC, and new uncertainties. The paper also looks at developments in liquidity risk management since the GFC, and provides an overview of current practices of the re/insurance industry based on a survey conducted amongst CRO Forum members.
The recommendations sections aims to provide practical advice for CROs and risk professionals for setting up or reviewing a liquidity risk management framework. There is no one-size-fits all with respect to an effective liquidity risk framework. The CRO Forum recommends a tailored approach, considering the firm specific risk profiles and risk appetites, which are determined by the organizational, capital and investment structures as well as the business mix.