Australia weighs up illiquidity premium for insurer liabilities

Australia is forging ahead of the rest of Asia in introducing risk-based capital regulation for its insurance industry with the recognition of an illiquidity premium. Could this in turn lead to a solution to Australian banks’ Basel III liquidity issues?


It is not just the banking sector that is trying to get to grips with risk-based regulation in Asia. As the Basel III framework has been rolled out across the region, regulators in some of these countries have started to turn their attention to the life insurance industry.

Most jurisdictions in Asia still adhere to solvency regimes where capital reserves are calculated on a basis that has little to do with companies’ actual risk profiles. A number of countries – including Singapore, Japan

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