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September 08, 2011 at 08:00 PM
The Statutory Accounting Principles Working Group is working on a disclosure template that could help regulators find out when an insurer is about to face a cash crunch.
The working group, part of the Financial Condition Committee at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., has posted an “exposure draft” version of a Fund Demand Disclosure for Institutional Business template on its section of the NAIC website.
Comments are due Sept. 30.
The working group is asking for ideas about ways to maintain the confidentiality of reports submitted using the template.
The working group wants an insurer to be able to use the template to give regulators confidential information about matters relating to “liquidity risk,” or the likelihood that the insurer might have to come up with cash quickly.
The template, based on a form developed by New York state insurance regulators, includes questions about matters such as whether an insurer has a formal, written liquidity plan; an insurer’s access to means of raising cash, such as the ability to issue commercial paper or draw on lines of credit; and the insurer’s use of yield-enhancing activities such as securities lending and repurchase agreements.
