MAS proposes lowering capital requirements for insurers

MAS is proposing to adjust the discounting of life insurance liabilities to reduce the impact of short-term volatility on insurers' capital adequacy.
MAS is proposing to adjust the discounting of life insurance liabilities to reduce the impact of short-term volatility on insurers' capital adequacy.PHOTO: ST FILE

SINGAPORE - Capital requirements for equity investment, credit spread, counterparty default and operational risk for insurers have been lowered by the Monetary Authority of Singapore (MAS) from its second public consultation on the Risk-Based Capital Framework for Insurers, to more accurately reflect risks.

This is among the key revisions to the risk-based capital (RBC) framework for insurers proposed by the MAS in its third consultation paper published on Friday (15 July) following industry feedback.

MAS isalso proposing to adjust the discounting of life insurance liabilities to reduce the impact of short-term volatility on insurers' capital adequacy. The MAS said this measure will enable insurers to continue providing sustainable long-term insurance solutions to policy holders.

The revised RBC framework is aimed at creating a more conducive environment for insurers to invest in equities and long-dated bonds, and offer long-term insurance products for policy holders, said the MAS, explaining that the move would benefit policy holders through better product pricing and asset allocation decisions by insurers.

The MAS stated that it has been closely engaging relevant stakeholders in its review of the RBC framework to keep abreast of the industry's needs while enhancing protection for policy holders. It said the review reflects efforts to maintain prudent capital requirements that are in line with insurers' risk profiles and business avctivities while complying with international standards and best practices.

"Insurers in Singapore are well-capitalised," said Mr Chua Kim Leng, MAS assistant managing director of banking and insurance.

"The review is not to raise regulatory capital requirements but to ensure that our framework for assessing capital adequacy better reflects an insurer's activities and risk profile," he added.

The consultation paper is available on the MAS website at www.mas.gov.sg. Comments can be sent to rbc2con@mas.gov.sg by 20 October.