Massive British life insurers would wish to report their liquidity positions each day throughout market crises underneath new guidelines proposed on Wednesday by the Prudential Regulation Authority, after it recognized data gaps throughout current market turmoil.
The worldwide COVID-19 pandemic in 2020 and a UK monetary assertion in 2022 triggered market disruption. The BoE took motion on each events to stabilize markets.
“These episodes led to derivative-driven liquidity strains for some insurers, in addition to highlighting gaps in insurers’ liquidity danger frameworks,” the PRA said in a consultation document.
Liquidity danger means insurers could not have the ability to promote investments in time to fulfill monetary obligations, the PRA mentioned.
The regulator mentioned it “recognized deficiencies in companies offering correct knowledge in a well timed method” through the crises, making it arduous to know their danger exposures.
UK life insurers’ publicity to derivatives has greater than doubled to 1.4 trillion kilos ($1.78 trillion) since 2018, the PRA mentioned, including that such devices generally is a “important supply of liquidity danger” throughout market volatility, as companies face sudden will increase in margin funds.
PRA mentioned the proposals would give it entry to extra well timed and constant data on massive UK insurers’ liquidity positions prematurely of market crises. The proposals would allow the regulator to pressure insurers to reveal liquidity positions each day throughout a disaster.
The brand new guidelines wouldn’t apply to Lloyd’s of London insurers, the PRA mentioned.
The PRA mentioned it was consulting on the modifications till March 31, 2025.
($1 = 0.7854 kilos)
(Reporting by Carolyn Cohn, Modifying by Louise Heavens)
