Luxembourg's CAA note following the Russia/Ukraine crisis


On 10 March 2022, the Luxembourg Commissariat aux Assurances (the “CAA”) published note 22/5 (the “Note”) providing for measures to be taken by all entities supervised by the CAA (the “Entities”) due to the Russia/Ukrainian conflict.

The CAA requests the Entities (i) to put in place enhanced due diligence measures and (ii) to make an impact assessment of the military aggression in the short and medium term (the “Measures”).

The Measures are set forth in the note and they included (i) an analysis of the exposition to counterparties and sectors subject to European and American sanctions, (ii) an analysis of the impact on written premiums and paid claims, (iii) an analysis of potential impacts on the business plan and, if necessary, revision of the business plan business plan, (iv) a review of the operational risks, notably when using external service providers based in Ukraine, Russia, Belarus or neighbouring countries, (v) an enhancement of identification measures of the client and of the beneficial owner, and (vi) an enhancement of IT security.

Moreover, insurance and reinsurance undertakings have also to perform (i) an analysis of counterparty risks related to intra-group transactions, (ii) a stress scenario analysis, as described in the Note, (iii) an analysis of technical commitments in terms of whether to exclude the risk of war in areas affected by the conflict, (iv) an analysis of the impact/sensitivity of market developments on the company's solvency ratio, (v) a liquidity risk analysis (also at the level of assets representing unit-linked liabilities), (vi) an analysis of risks in relation to custodian banks and (vii) an identification of potential sanction asymmetries between risks underwritten by the reinsurance treaties entered into to mitigate these risks.

Where necessary, the Entities shall send a new own risk and solvency assessment (ORSA) to the CAA, and in any case, they must make the results of the above analysis available to the CAA.

Should you have any questions relating to the above, please do not hesitate to contact one of the experts of our insurance team.