In the information note 22/5 dated 10 March 2022, the Luxembourg Commissariat aux Assurances (CAA) requested that all entities under its supervision carry out an impact assessment in the short and medium term and should implement enhanced due diligence measures following Russia's military aggression against Ukraine.
The enhanced due diligence and analysis of potential impacts undertaken should cover at least the following areas:
- Analysis of the entity’s exposure to counterparties/sectors subject to the new EU/US sanctions
- Strengthening of measures to identify the client/beneficiary in the case of transactions or provision of services
- Review of operational risks, particularly in the case of recourse to external service providers based in Ukraine, Russia, Belarus or in neighbouring countries and, if necessary, adapt business continuity plans
- Reinforcement of vigilance measures in terms of IT security (cyber attacks)
- Analysis of counterparty risks linked to intra-group operations, particularly with regard to reinsurance and cash-pooling (*)
- Analysis of the impact on written premiums and paid claims
- Analysis of stress scenarios (*):
- cumulative direct exposures in the geographical zones concerned (e.g. credit and surety exposures in Russia, property portfolio in Ukraine) and indirect exposures
- accumulations in unaffected areas (e.g. increased frequency of cyber attacks on the European portfolio)
- inflation in a low or negative growth environment
- Analysis of technical commitments in terms of whether to exclude the risk of war in areas affected by the conflict (*)
- Identification of potential asymmetries in the sanctions to be applied between the risks underwritten by the company and the reinsurance treaties concluded to mitigate these risks (*)
- Analysis of the impacts/sensitivities of market developments on the solvency ratio of the undertaking (*)
- Analysis of liquidity risk (also at the level of assets representing unit-linked liabilities) (*)
- Analysis of risks in relation to custodian banks (*)
- Analysis of potential impacts on the business plan (and, if necessary, revision of the business plan),
In the event that all of the above analyses have identified the need for an entity to produce a new own risk and solvency assessment (ORSA) (e.g. as a result of an adjustment to the business plan or the development of new scenarios), the entities concerned are invited to send this amended ORSA to the CAA.
Notwithstanding the above paragraph, the results of the analysis, reviews and revisions must be made available to the CAA.
In the event of the emergence of a material risk, the entity is invited to contact the CAA as soon as possible.
(* These areas are only relevant for insurance and reinsurance undertakings)