Managing liquidity risk in a volatile market - and improving returns

Recently, regulators have become increasingly concerned about liquidity risk management issues, such as insurance cycles where companies sell assets in a downturn and search for yield in an upturn, increased liquidity exposures through margin calls on derivatives, mass lapses where surrender penalties are low, insufficient working capital to fund critical services in a crisis and the inability to service debt due to trapped liquidity.

EY surveyed some of the world’s largest insurance groups to determine their priorities and concerns. This paper summarises the key themes from these discussions.