Creating a more robust insurance industry in Singapore, based on sound institutions and high quality financial advice, are at the core of a series of initiatives being taken by the country’s Central bank.
The regulator said it is in the process of revising the risk-based capital framework for insurers, in line with the similar measures taken by other regulators, and plans to start a new consultation by the end of the month, according to Loo Siew Yee, executive director of the insurance department, Monetary Authority of Singapore.
Loo was speaking today at the Life Insurance Association’s annual luncheon.
She said the MAS will work closely with the Life Insurance Association in implementing some of the key recommendations of the Financial Advisory Industry Review, pertaining to the web aggregator, direct distribution channel for basic insurance products, as well as the balanced scorecard framework, she said at an event organised by the insurance industry association.
“MAS values ongoing collaboration with LIA on the initiatives rolled… Let us work together to enhance the quality of advice and distribution of financial products with the ultimate goal of improving the financial preparedness of Singaporeans.”
“MAS values on going collaboration with LIA on the initiatives rolled…Let us work together to enhance the quality of advise and distribution of financial products with the ultimate goal of improving the financial preparedness of Singaporeans.”
Risk-based Capital Framework
Regulatory changes, volatile financial markets and cyber risks are among the key challenges for the insurers, said Yee who took up the role of executive director of the insurance department six months ago.
Highlighting the aftermath of the global financial crisis, she said, “While banks have been the main subjects of these regulatory initiatives, insurance industry has also come on the spotlight.”
“On the global front there is important work being done including basic capital requirements, higher loss absorbancy requirements for GSIIs (globally systemically important insurers) and insurance capital standards for internationally active insurance groups. At the same time many insurance regulators are revamping their solvency regimes.”
“Singapore too is in the midst of revising her own risk-based capital framework. These reforms are necessary to ensure that regulations continue to be fit for purpose and adequately address risk both at institution and system levels,”
She stressed on the insurance industry to be prepared for these changes and position itself to the new regulatory environment, which will see three key regulatory initiatives for the insurance industry: Risk-based Capital Framework (RBC 2), Enterprise Risk Management (ERM), and Financial Advisory Industry Review (FAIR).
The Risk-Based Capital (“RBC”) framework for insurance companies was first introduced in Singapore in 2004, that adopts a risk-focused approach to assessing capital adequacy and seeks to reflect the relevant risks that insurance companies face.
“The consultation paper will detail some revised proposals as well as the risk calibration methodologies and factors. One key revision will be the introduction of a matching adjustment, which will provide some relief from the short-term volatility in the value of bond holdings due to movement in credit spreads.”
The consultation will be open for three months and insurers will be requested to submit themselves the quantitative impact studies over this period.
Meanwhile, the Life Insurance Association today said it has elected Khoo Kah Sian, chief executive officer of Great Eastern Life, as its president. He succeeded Annette King, who stepped down as president from October as she is to take on a newly created regional role to be based in Manulife's regional offices in Hong Kong, as reported.
Noting that even as Singapore’s life insurance industry achieved positive business in 2013
, Siang said there are multiple challenges and issues that lie ahead of the industry.
“Certainly uncoordinated, but somehow many ‘heavy weight’ regulations will all take effect this year and next year,” Khoo said referring to some of the initiatives in Financial Advisory Industry Review, such as web aggregator, balanced scorecard framework, and direct marketing channel.
The industry association also announced that it re-elected Chris Gill, general manager of Friends Provident International South East Asia and Ken Ng, chief executive of NTUC Income, as deputy presidents.