Life Liquidity Risk Working Group - NAIC


6. Report of Life Liquidity Risk Working Group

  • Mr. DeAngelo said the working group held an organizational meeting and will consider and make recommendations related to products issued by life insurers that have significant liquidity risk, for example guaranteed investment contracts (GICs) with bailout provisions.
  • The working group will consider appropriate limits on the level of activity by insurers, required or prohibited contractual
    language, reserving methods, reporting requirements, and risk management systems for insurers engaged in this activity. Mr. DeAngelo moved and Mr. Burch seconded a motion to adopt the Life Liquidity Risk Working Group report (Attachment Eight). Commissioner Koken said she was pleased with the states that are participating in this new working group and opined that the issues it is
    addressing are important. The motion to adopt the Life Liquidity Risk Working Group report passed.


  • March 12
  • March 25
  • ¬†

2000-1,  March 12, 2000

  • 1. Introductory Comments from Mr. Vance
    Mr. Vance noted that the charge for this group had previously been assigned to the Life and Health Actuarial Task Force, but
    had subsequently been assigned to this newly created group to address the broad range of liquidity issues. He also stated that, for purposes of beginning the discussion on liquidity risk, the following definition will be used: "The inability of a company to meet a financial commitment when it comes due either through cash flow or liquidation of assets at fair market value."
  • Next, Mr. Gorski described what he considers to be the appropriate components of a regulatory framework in monitoring liquidity risks:
    • ¬†Existence of adequate company-wide risk management system.
      • The keys are "adequate" and "company-wide."
        Discussions to date have focused on product-level risk management. Evaluation of "adequacy" is an issue.
  • 3. Status Report from the American Academy of Actuaries
    Donna Claire (Claire Thinking)....... In summary, Ms. Claire stated that the AAA intends to assist in identifying "what are the risks, what are the tools, and just give you the feeling for what are the possibilities regarding where the actuary can help" identify liquidity risks.
  • 5. Discuss Future Work Plans
    • Mr. Vance responded that the working group is interested in the broader problem, i.e., the liquidity position of the entire company.