PINS S1.2 Risk management policy — credit risk

(1) An insurer's risk management policy for credit risk should include:
(a) a mandate setting out the acceptable range, quality and diversification of credit exposures (including those to reinsurers, brokers and policyholders) and investments;
(b) limits for credit exposures at individual and consolidated levels to:
(i) single counterparties and groups of related counterparties;
(ii) intra-group asset exposures to subsidiaries and related entities;
(iii) single industries; and
(iv) single regions;
(c) a process for approving changes in the credit mandate and changes in limit structures;
(d) a process for approving requests for temporary increases in limits and a process to ensure excesses are brought within the pre-approved limits within a set timeframe;
(e) a process for reviewing and, if necessary, reducing or cancelling exposures to a particular counterparty if it is known to be experiencing problems;
(f) a process to monitor and control credit exposures against pre-approved limits;
(g) a process to review credit exposures (at least annually, but more frequently if there is evidence of a deterioration in credit quality);
(h) a management information system that is capable of aggregating exposures to any 1 counterparty (or group of related counterparties), asset class, industry or region in a timely manner; and (i) a process of reporting to the governing body and senior management:
(i) any breaches of limits; and
(ii) large exposures and other credit risk concentrations.
(2) Actual and potential credit exposures to reinsurers arising from current or possible future claims should be included in the insurer's risk management policy.
Inserted by QFCRA RM/2013-1 and amended by Editorial changes (as from 1st January 2015).