EIOPA consults on liquidity risk management for insurers
EIOPA today launched a consultation on a draft Opinion for supervising liquidity risk management in occupational pension schemes, setting out expectations for how national authorities should oversee IORPs’ ability to meet cash calls. The consultation aims to align supervisory approaches across Europe to protect pension fund members and beneficiaries and support the stability of IORPs and the wider financial system.
Key elements of the IORP liquidity consultation • The consultation focuses on how supervisors should assess IORPs’ exposure to liquidity strains from margin and collateral calls, early benefit withdrawals and outgoing transfers, reflecting vulnerabilities highlighted in recent market stress. EIOPA said these channels can create sudden cash needs that interact directly with funds’ investment portfolios.
• The paper builds on EIOPA’s March 2023 IORP II review work, which identified that IORPs using derivative hedging strategies face substantial liquidity risks, particularly in stressed markets. That earlier consultation warned that an inability to raise cash for margin calls can trigger fire-sales of assets, depressing investment returns and threatening wider financial stability.
• As part of the IORP II review, EIOPA previously floated a policy option to embed specific liquidity risk management provisions for IORPs with material derivative exposures into both the own-risk assessment and the supervisory review process. The new consultation develops this line by setting out how supervisors should test and challenge schemes’ liquidity frameworks where derivatives are used.
• EIOPA’s latest move follows its December 2023 Financial Stability Report, which examined the liquidity position of insurers and the impact of derivative margin calls on occupational pension funds. That report noted that the 2022 UK Gilt market crisis and turmoil around US regional banks underlined the need for closer liquidity monitoring across balance sheets exposed to interest-rate and credit shocks.
• The same stability report found that the aggregate liquidity position of solo undertakings deteriorated in 2022, mainly due to the fall in bond values, reinforcing supervisory attention on how market moves can erode readily realisable assets.
Link to wider Solvency II liquidity work
### In parallel with the IORP work
EIOPA has also been consulting on detailed Solvency II liquidity rules, including an October 2024 consultation on draft Regulatory Technical Standards for liquidity risk management plans. Those draft standards set criteria for which undertakings and groups must incorporate medium- and long-term analyses into their liquidity plans, extending the focus beyond short-term cash coverage.
### EIOPA published its final report
on the draft RTS on liquidity risk management plans on 17 November 2025, following industry feedback on the October 2024 proposals. The public consultation on the RTS ran from 1 October 2024 to 2 January, giving firms and stakeholders a full quarter to respond.
### EIOPA held a dedicated stakeholder
event on 27 November to discuss the liquidity plan consultation, and ten stakeholders, including EIOPA’s Insurance and Reinsurance Stakeholder Group, submitted feedback.
### The draft RTS expects undertakings
to report their own assessment of liquidity risk within their liquidity risk management plan, calibrated to their internal risk tolerance limits, to support a risk-sensitive and proportionate implementation across different business models.
### EIOPA also expects those plans
to include arrangements to deal with changes in expected cash inflows and outflows, including maintaining a liquidity buffer that can be drawn on when markets move or policyholder behaviour shifts.
### The Solvency II review has
given EIOPA a formal mandate to develop Guidelines on supervisory measures to address deficiencies in undertakings’ liquidity management, extending the authority’s toolkit where weaknesses are identified. As part of that review package, EIOPA launched six consultations in October 2024 covering two revised implementing technical standards, two revised guidelines, one set of new regulatory technical standards and one set of guidelines, with liquidity risk management plans forming one strand of the work.
--- Sources: https://www.eiopa.europa.eu/ https://www.eiopa.europa.eu/system/files/2023-03/EIOPA-BoS-23-071_CP-advice-IORP-II-review.pdf https://www.eiopa.europa.eu/consultations/consultation-supervising-liquidity-risk-management-iorps_en
