New risk-based inspection procedure, guideline, methodology now effective

The Financial Regulatory Commission has started following newly-developed procedure, guideline and methodology to adopt an inspection system based on risks and performance.

In particular, the commission approved the Risk-based Capital Calculation Methodology, Procedure on Remote and Onsight Inspection of Operations of Insurance Companies, and Insurers’ Guideline for Evaluating its Risk and Liquidity Capability. These documents took effect on January 2.

The Risk-based Capital Calculation Methodology determines if regular, long-term and reinsurance companies have sufficient capital to fully fulfill their obligations specified in the agreement by the deadline, according to the Financial Regulatory Commission. This methodology also makes it possible to calculate other risks that are usually calculated with different methods.

The commission says that the new methodology will help increase the types of risks that can be measured and make information related to insurance operations more accessible and transparent.

Through the Procedure on Remote and Onsite Inspection on Operations of Insurance Companies, the Financial Regulatory Commission will provide licensed insurers assessments on their financial and solvency status, company management, control environment and risk management level in addition to determining the organization’s risk level and regulating their risk prevention measures. It also provides guidelines for conducting remote and onsite inspection and developing reports.

The Insurers’ Guideline for Evaluating its Risk and Liquidity Capability will assist insurers determine, calculate, monitor and report on their own risks and solvency.