What is Liquidity Risk?
Liquidity Risk The risk that an insurer will not be able to meet its short-term financial obligations as they come due without incurring unacceptable losses, due to insufficient liquid assets or market constraints.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Liquidity Risk” Used in Practice?
Insurance companies actively monitor liquidity risk to ensure claims and policyholder obligations can be met even under stressed market conditions.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Liquidity Risk?
The risk that an insurer will not be able to meet its short-term financial obligations as they come due without incurring unacceptable losses, due to insufficient liquid assets or market constraints.
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