PINS S2.6 What is liquidity risk?

(1) Liquidity risk is the risk of the insurer not having sufficient cash or liquid assets to meet its cash outflows to policyholders and other creditors as they fall due.
(2) The nature of insurance activities means that the timing and amount of cash outflows are uncertain. This uncertainty may affect the ability of an insurer to meet its obligations to policyholders or require an insurer to incur additional costs through, for example, raising additional funds at a premium on the market or through the sale of assets.
Inserted by QFCRA RM/2013-1 (as from 1st January 2015).