MAS lowers capital provisions for insurers

The MAS said it has been closely engaging stakeholders in its review of the RBC framework to keep abreast of the industry's needs while enhancing protection for policyholders.
The MAS said it has been closely engaging stakeholders in its review of the RBC framework to keep abreast of the industry's needs while enhancing protection for policyholders. PHOTO: AFP

Revision in line with industry feedback and better reflects insurers' risks, says regulator

Insurers here have succeeded in persuading the industry regulator to relax, somewhat, the capital requirements contained in a proposed revised framework applying to the sector.

The Monetary Authority of Singapore (MAS) said the recalibration downwards of the capital requirements is in line with industry feedback - and more accurately reflects risks to insurers.

"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 move was among key revisions to the Risk-Based Capital (RBC) framework for insurers proposed by the MAS in its third consultation paper published yesterday following industry feedback.

The risk-based approach is used to assess the financial strength of insurers through their capital adequacy and the risks they face in the market to ensure their sustainability.

The MAS said 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 policyholders as the move would benefit policyholders through better product pricing and asset allocation decisions by insurers. The framework will also offer better protection for policyholders through a more risk-sensitive framework.

The MAS is also seeking feedback on insurers' interest in infrastructure asset class, and the specific types and characteristics of infrastructure financing appropriate for insurers, given that they are long-term investments. Feedback will allow the MAS to formulate specific capital requirements for this asset class.

The MAS said it has been closely engaging stakeholders in its review of the RBC framework to keep abreast of the industry's needs while enhancing protection for policyholders. It said the review reflects efforts to maintain prudent capital requirements in line with insurers' risk profiles and business activities.

The consultation paper is available on the MAS website at www.mas.gov.sg. Comments should be made to rbc2con@mas.gov.sg by Oct 20.

A version of this article appeared in the print edition of The Straits Times on July 16, 2016, with the headline 'MAS lowers capital provisions for insurers'. Print Edition | Subscribe