Page 66 - Risk Management in current scenario

conditions, in this case, cost of securing the liquidity may be reflected
in product design and pricing.

X Liquidity risk may be managed through the design of the product,
where possible on limiting the surrender value or limiting the number
of times surrenders can be made.

X Surrender penalty, surrender change, loyalty additions are some of
the commonly used techniques used in the global market to manage
unprecedented withdrawals.
X For high value death claims, early payment clause may be inserted
with reinsurer to pay the claims say within 15 or 30 days.
X Monitoring regularly, the assets and liability cash flows and LCR ratio
for early warning signals.

X Monitoring the credit rating of the corporate bonds provider and
reinsurer, and taking corrective action as and when it is necessary

X Allowing adequate liquidity provisioning while designing strategic
assets allocation

X Preparing regularly reviewing company's liquidity contingency
planning.

Conclusion
An insurance company may choose to adopt any of the liquidity
measurement and management methods suiting to their need; the key point
to note is liquidity should not be looked into isolation and care should be
taken while considering assets used to measure the liquidity risk.

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64 | Risk Management in Current Scenario