Internal Interconnectedness in Resolution Planning for Insurers: Practices Paper
Mapping and assessing financial and operational internal interconnectedness are of critical importance for resolution planning for insurance companies.
Individual insurance entities within a group are often linked with other entities within the group through financial exposures, such as intragroup loans, guarantees, derivatives positions and reinsurance contracts. In addition, they often receive operational services from other entities in the group, such as human resources, risk management, and information and communications technology. Individual insurance entities within the insurance group or within a conglomerate depend on these linkages for their financial and operational continuity. Moreover, these interlinkages may have an impact on the design and choice of the preferred resolution strategy.
Identification and mapping enable understanding of how entities within insurance groups are interrelated and allow for capturing the complexity of a group and indicate how contagion channels would materialise.
This paper, which highlights a range of current practices from several jurisdictions, could be relevant for all insurance groups, such as Global Systemically Important Insurers, Internationally Active Insurance Groups and other insurance groups eligible for resolution planning.
The FSB invites feedback on its practices paper on resolution funding for insurers. The submitted views would help inform FSB’s further reflections. In particular, the FSB invites feedback from stakeholders on the following:
What elements of information required in your jurisdiction regarding the description and mapping of internal operational interconnectedness are the most relevant? Which further elements could support the assessment of interconnectedness? Which elements of these reporting requirements are easy to deliver, and which elements pose challenges? Are there specific challenges related to the mapping and assessment of cross-border interconnections?
What further consequences or challenges to financial and operational continuity in resolution should be considered in the context of operational interconnectedness in addition to those identified in the paper? What preparatory measures could be taken to ensure the smooth execution of resolution action? Are there specific challenges related to cross-border interconnections?
Are there additional or different considerations to be applied to the above questions, based on whether the insurer is part of a conglomerate or not?
Please submit your feedback to the FSB by 15 March 2022. Responses will be published on the FSB’s website unless respondents expressly request otherwise. The FSB will also host a workshop on these topics with stakeholders in Q2 2022 around the same questions.