FINMA’s revised requirements for insurers with regard to liquidity came into force on 1 January 2025. The aim is to ensure the solvency of insurers and effectively manage liquidity risks. This document provides an overview of the most important obligations for insurers in accordance with FINMA Circular 2025/3.
Clear responsibilities and governance structures form the basis
Insurers must ensure clear structures and responsibilities in the area of liquidity management. The way in which responsibilities are shared between the board of directors and the executive management must be documented. The board of directors assumes a central role by approving and regularly reviewing the liquidity strategy and key principles in connection with liquidity management. It determines the risk appetite and monitors the implementation of the defined measures. At the same time, the executive management must ensure that relevant information on significant changes or risks is reported in good time. Internal reporting channels and a clear division of responsibilities are essential.
Strategic liquidity planning – a look into the future
Carefully structured liquidity planning is crucial for insurers. Strategic liquidity requirements must be analysed annually to ensure financial stability. Business strategy, external influences and the financing of current and future obligations are all factored into the planning. Changes require an adjustment of the strategy. Insurers must consider liquidity flows from business activities, investments and financing, and must carry out stress tests to hedge risks. They must also keep an eye on exchange rate risks and operational restrictions. The following categories need to be defined for the individual assets according to their maturity and marketability:
Highly liquid assets should always be available and planning must be regularly reviewed and documented.
Securing liquidity reserves for ordinary and extraordinary situations
Insurers are obliged always to have sufficient highly liquid assets available that can be accessed at short notice to bridge bottlenecks. These reserves must be diversified and their availability must not be restricted by legal or operational obstacles. It is necessary to ensure that the composition and availability of these reserves are regularly reviewed and harmonised with strategic planning. In addition to highly liquid assets, other liquid assets may be utilised provided they are immediately available if required.
Liquidity risk management – a task for the Board of Directors and the Executive Management
Effective risk management is crucial to avoid liquidity bottlenecks. Insurers must implement a comprehensive framework that covers all aspects of risk management. This includes defining a risk appetite that includes the minimum requirements for reserves and coverage ratios. Regular stress tests and scenario analyses must be carried out to check the resilience of existing strategies. Insurers that are part of a group must ensure that intra-group dependencies are also included in the risk assessment. Particular attention must be paid to the ability to utilise intra-group liquidity resources unhindered, even under difficult conditions.
Controlling and monitoring to ensure that measures are implemented
An insurer’s controlling system must ensure that compliance with liquidity requirements is continuously monitored. Both quantitative methods (such as key figures for measuring liquidity reserves) and qualitative methods are to be used. Regular reporting to the executive management and the board of directors is required to ensure transparency. A comprehensive assessment of the effectiveness of the liquidity risk management framework must also be carried out at least once a year.
Predefined emergency concept for the worst-case scenario
To be able to react quickly and effectively to acute liquidity bottlenecks, insurers must implement an emergency concept. This concept includes early warning systems that enable risks to be recognised in good time, as well as escalation levels that define the options for action depending on the severity of the bottleneck. Clear communication channels and decision-making processes must also be defined. This emergency concept must be regularly updated and integrated into the overarching risk strategy.
Reporting to FINMA
Insurers are obliged to submit a standardised report on their liquidity planning and situation to FINMA every year. These reports must be submitted by 30 April of the following year. In addition, extraordinary changes, such as significant liquidity problems or the activation of the emergency concept, must be reported immediately. The reporting requirements depend on the size and risk category of the insurer. Small insurers benefit from simplified reporting obligations, provided there are no significant risks.
Transitional arrangements and conclusion
The upcoming FINMA requirements introduce significant challenges for insurers – but also a strategic opportunity. With the first report due by 30 April 2026 and key survey elements set for release by 30 June 2025, early action is essential. By proactively addressing these new regulations, insurers are able not only to ensure compliance, but also to gain a competitive edge by identifying and managing risks more effectively. How prepared is your company to turn these regulatory demands into a business advantage?
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