Market and Liquidity Risk Management for Insurers
The effective management of market and liquidity risks is critical for any insurance company operating in today's constantly evolving financial landscape. Failure to manage these risks has the potential for devastating consequences, including massive financial losses and reputational damage that can be difficult to recover from.
At Finalyse, our market risk service offering is designed to help our clients navigate these challenges with expert guidance and principled, innovative solutions. Our team leverages our interdisciplinary experience in ALM, Market Risk Management, and Solvency II to deliver value and address your challenges.
Finalyse will support you in identifying, measuring, managing, mitigating, and reporting your market and liquidity risks, ensuring your business’s long-term success and sustainability.
How does Finalyse address your challenges?
Identify Market Risks
Comprehensive identification of all relevant market risks on your balance sheet and integration into your risk register.
Measure Market Risk
Centralize market risks and ensure that nothing is unaccounted for.
Create or optimise risk measurement calculations for market risks such as DV01 and CS01 (incl. volatility adjustment).
Mitigate, Manage, and Report Market Risk
Implement strategies to mitigate or manage market risk (e.g., duration matching, hedging strategies, liability-driven investing), and ensure risks are within limits through regular risk monitoring and reporting.
Capital Measurement and Optimisation
Measure market risk impacts on SCR and Economic Capital, and reduce the capital required through ALM optimization.
Manage and Optimise Liquidity Risks
Optimise liquidity through Fund Transfer Pricing and Minimising Cash Drag.
Ensure sufficient liquidity is held for collateral or margin calls by managing, monitoring, and reporting on liquidity ratios.
Implement software, solutions, and tools
Support with the implementation of tools and software solutions such as SAS, FIS, and AXIS to manage and report on market and liquidity risks.
How does it work in practice?
RISK MANAGEMENT FRAMEWORK FOR MARKET AND LIQUIDITY RISK
MARKET AND LIQUIDITY RISK MANAGEMENT FOR CENTRALISED TREASURY
Key Features
- Finalyse provides a comprehensive solution for market and liquidity risk management, including identification, measurement, management, mitigation, and forecasting.
- Finalyse provides expertise in the following areas:
- Capital measurement and optimization
- Identification, measurement, and management of market risks
- Management and optimization of liquidity and liquidity risks
- Operationalising funds transfer pricing
- Establishment and optimisation of funding plans
- Finalyse will leverage its interdisciplinary expertise in ALM, market, liquidity and credit risks, as well as its experience consulting to banks and insurers and reinsurers, to deliver world-class solutions.
- Finalyse can support you in specific areas or throughout the entire market risk management life cycle.
Our subject matter experts
François-Xavier is a Principal Consultant with advanced expertise in Financial Markets, ALM and Risk Management, covering both banks and insurance companies. On the banking side, François-Xavier is a practice leader on Valuation, IRRBB, FRTB, VaR, Initial Margin and Counterparty Risk, well acquainted with the regulatory requirements and the market practices surrounding market risks. On the insurance side, François-Xavier has extended experience in the regulatory treatment of financial instruments, ORSA, and hedging balance sheets against interest rate, credit spread and inflation risks.
Frans is an actuary and Financial Risk Manager with international experience in the pensions and insurance sectors. He has been specialising in climate change risk management, actuarial valuations (AXIS), financial reporting (IFRS17, IAS19), regulatory reporting (BMA EBS, Solvency II, ICS, IORP II), market risk management (ALM, SAA) and investment consulting.
Stéphane is a senior consultant with proven skills in credit and market risk (including FRTB) and extensive knowledge of financial markets. He is a subject-matter expert in IFRS 17, Basel II, Basel III and Solvency II,. His field of competence also covers Strategic Asset Allocation (SAA) for insurers. Stéphane has been involved in the implementation of IFRS 17 for many insurance and reinsurance companies in Europe and North America. He is an active member of the Finalyse IFRS 17 Centre of Excellence, where he has been leading the development of the Finalyse IFRS 17 calculation and reporting tool.
Bence is a senior actuary with 20+ years of experience in life actuarial science and reporting in Solvency II, IFRS, BMA EBS and ICS regulations. His focus has been on actuarial and risk modelling - including capital projections, market risk management and internal model validation – and ERM framework design. Bence delivers business transformation, reinsurance, new authorisation and M&A projects and is keen on applying machine learning and data analytics for actuarial use cases.
Client Cases
Ethias has had a fruitful collaboration with Finalyse on a range of ALM issues over the years.
Finalyse consultants came up with practical solutions to produce integrated risk measures across the balance sheet, allowing for new simulation capacities, shorter timelines in the production of ALCO material, and, altogether, a greater ability to deliver on the objectives of the ALM function. In particular, the collaboration with Finalyse was instrumental in setting up an interest rate hedging strategy that protects Ethias's solvency capital ratio.
Christophe Matere,
ALM & Economic Projection
Review of the market risk stress testing framework for a major Belgian bank
The Middle Office department wanted to investigate a method to enrich the stress testing canvas, through a more robust identification and quantification of the risk factors of interest; and by adding a reverse stress testing component to the existing framework. Finally, Finalyse provided the client with an in-depth "Stress Test Review" document including:
- A definition of the risk factor sensitivities which had to be consistent with the reverse stress-testing protocol
- An analysis of the dependencies between risk factors in order to establish a stress-testing protocol with a gradually increasing level of complexity.
This project enabled the client to have a clear and comprehensive analysis of the pre-existing and new "Stress Test" frameworks, to close the gap between those two in accordance with the audit and regulator's recommendations.
Moreover, the institution now has a well-documented process and prototype, which constitute a solid but flexible basis for further work, improvement, or adjustments regarding anything related to Stress Tests and Reverse Stress Tests.