• PINS S7 PINS S7 Concentration risk

    • PINS S7.1 What is concentration risk?

      (1) Concentration risk is the risk of over-reliance on, or excessive exposure to, a type of risk, counterparty, asset class, industry or region as a result of credit, balance sheet and market, reserving, insurance, reinsurance, operational and group risks.
      (2) Concentration risk results from risk exposures with a loss potential that is large enough to threaten the solvency position of an insurer.
      (3) An insurer's exposure to risks should not result in a concentration of risks that could result in losses so large as to threaten its solvency position.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).

    • PINS S7.2 Risk management policy — concentration risk

      An insurer's risk management policy for concentration risk should include:

      (a) identification of large risk exposures;
      (b) a description of the way in which large risk exposures are being managed, controlled and mitigated by the insurer;
      (c) a description of any limits put in place by the insurer to control concentration risk;
      (d) identification of on-balance sheet and off-balance sheet exposures to concentration risk;
      (e) risk management procedures in relation to concentration risk; and
      (f) processes to ensure that the insurer's exposures to large potential losses due to concentration risk are in line with its risk tolerance.
      Inserted by QFCRA RM/2013-1 (as from 1st January 2015).