Portugal’s Insurance and Pension Funds Supervisory Authority (ASF) published Recommendation No. 3/2025 setting supervisory expectations for insurers and reinsurers on liquidity risk management and asset-liability management (ALM), alongside more granular analysis in the Own Risk and Solvency Assessment (ORSA) and enhanced public disclosure in the Solvency and Financial Condition Report (SFCR). The recommendations are framed as reinforcing prudent risk management in a changing interest rate environment and aligning practices with International Association of Insurance Supervisors standards, notably Insurance Core Principles 16 and 20. The recommendations apply to insurance and reinsurance undertakings headquartered in Portugal, Portuguese branches of third-country insurers and reinsurers, and relevant group entities where ASF is the group supervisor. Firms are expected to define liquidity risk indicators that allow identification, measurement and monitoring across short-term horizons (up to three months) and medium to long-term horizons (over three months), and to ensure liquidity risk management plans cover multiple scenarios with defined procedures and implementation timelines. Within the ORSA, undertakings should perform a comprehensive and detailed assessment of liquidity risk across time horizons, capturing all material exposures, and where liquidity risk is deemed material, identify the measures to be taken for stress tests and scenarios that materially affect liquidity. For SFCR disclosures, ASF recommends expanded qualitative information on how ALM is integrated within governance, including coordination of assets and liabilities, segmentation, key methodologies and assumptions, and the use of derivatives or other instruments, as well as liquidity risk disclosures covering risk tolerance limits and reasons for deviations, forward-looking quantitative liquidity needs and surpluses for at least one year, quantitative breakdowns of asset and liability liquidity levels, and the criteria used to assess those liquidity levels. ASF will monitor implementation through supervisory follow-up focused on ORSA exercises and SFCR disclosures. The recommendations apply to ORSA exercises conducted after publication and to public disclosures for the 2025 reporting year and onwards.
Portuguese Insurance Regulator (ASF) 2025-05-13
Portugal’s Insurance and Pension Funds Supervisory Authority issues recommendations to strengthen insurers’ liquidity risk and asset-liability management and related SFCR disclosures
Portugal’s Insurance and Pension Funds Supervisory Authority (ASF) issued Recommendation No. 3/2025, outlining expectations for insurers and reinsurers on liquidity risk and asset-liability management (ALM). The guidance emphasizes prudent risk management in a changing interest rate environment, aligning with International Association of Insurance Supervisors standards. ASF will oversee implementation through supervisory follow-up on Own Risk and Solvency Assessment (ORSA) exercises and Solvency and Financial Condition Report (SFCR) disclosures.