2022 - IAIS - Development of Liquidity Metrics - Phase 2

  • NAIC  - Draft Comments - 1p
  • (p10) - Non-traditional non-insurance (NTNI) activities, including off-balance sheet derivative transactions for non-hedging purposes, over-the-counter (OTC) transactions and/or leveraging assets to enhance investment returns, may give rise to liquidity risk and financial instability.
  • Is Universal Life NTNI?  Has that actuall been weighed in on?  Past Consultations - no definitive answer??Japan??
  • (p11) - A liquidity need at the insurer level could force the insurer to recall loaned securities and transmit stress to counterparties who may no longer meet their own liquidity requirements. 

"In August 2007"... "Mark Hutchings, an employee in AIG’s securities-lending arm, explained..."

  • "We need to raise our threshold of actual cash liquidity. . .
    • .You can sell investments we already have in our collateral account to raise cash,
    • or we can lend more securities to give ourselves that cushion of comfort.
  • And again what we’re protecting ourselves [from] was a run on the bank—"  (p26-27)

FCIC Staff Interview with Mark Hutchings, AIG (June 22, 2010)

2014 - Securities Lending and the Untold Story in the Collapse of AIG, George Mason. University Mercatus Center Working Paper No. 14-12 ,by Hester Peirce

1.6 Consideration of capital

  • (p13-14) -  Insurers are less vulnerable to customer runs.
    • The most common event that would give rise to liquidity risk for life insurers is the risk of simultaneous withdrawals or policy surrenders by policyholders in the event of negative publicity of an insurer or growing concern on an insurer’s financial condition.
  • 1970s
    • BTID
    • FTC Report
  • 1990s
    • Executive Life
    • Mutual Benefit