Members of the Invested Asset Working Group will meet over the telephone 11 a.m. April 7 to discuss options for improving regulation of liquidity and event risk.
One item on the agenda will be the introduction of a draft of a staff summary report on liquidity and event risk regulation.
John Hopman, Joseph Prakash and Bob Carcano of the Securities Valuation Office have prepared the draft.
The authors note that they have not yet seen the New York liquidity report and that California does not have a state-specific liquidity report.
The Connecticut department’s report “recognizes correctly that a liquidity crunch can come from a variety of sources on the asset side, including collateral calls on credit default swaps, guaranteed annuities, securities lending, and funding agreements,” the authors of the draft write. “On the liabilities side, insurance claims also require immediate cash settlement. The goal of [Connecticut department's] monthly report is to track asset/liability management short-term by comparing the available liquid assets (that is, cash, short-term investments, and treasuries net of collateral) with the liquidity required to meet current obligations.”
The Connecticut department also tracks the expected dividend to be paid, another factor that can affect cash flow, the authors write.
The Connecticut department report liquidity report “is not designed for individual securities, but more on a portfolio level,” the authors write.
The department “asks for information on the conduit, that is, the banker or corporate entity that is holding the assets to pay Connecticut claims,” the authors note.
Applying the Connecticut disclosure requirements in all NAIC jurisdictions, and to noninsurance-regulated subsidiaries, could help regulators measure enterprise-wide liquidity risk, the authors write.
Documents concerning the call are available here.
CORRECTION: The original version of this article gave the incorrect date for the teleconference.