The Solvency II review has introduced requirements for (re)insurers to prepare a liquidity risk management plan (LRMP) as part of a suite of new macroprudential supervisory measures. The Solvency II Directive defines liquidity risk as “the risk that insurance and reinsurance undertakings are unable to realise investments and other assets in order to settle their financial obligations when they fall due”.
In this paper, we explore the key features of LRMPs, as outlined by the European Insurance and Occupational Pensions Authority (EIOPA) in its “Final report on draft Regulatory Technical Standards on liquidity risk management plans”. Although the Regulatory Technical Standards (RTS) have not yet been formally adopted by the European Commission, they have already been subject to public consultation and were submitted to the European Commission in November 2025. Commission adoption is now the remaining step before the RTS take effect, so it is not expected that there will be any further changes before these standards are finalised.
Key discussion points include the following:
- Background: How the Solvency II Directive defines liquidity risk.
- New requirements: Explicit rules relating to the preparation of LRMPs from the Amended Directive.
- Regulatory submission: Requirements for undertakings on submitting LRMPs to their supervisors.
- Scope of plans: Criteria to be used by supervisory authorities when selecting firms that are in scope of medium- and long-term liquidity risk management plans, in addition to preparation of short-term plans.
- Structure and contents: Expectations set by EIOPA’s RTS for the LRMP.
- Liquidity risk management at group level: Overall structure and required contents.