Key Supervisory and Regulatory Initiatives

NEW REGULATIONS

BOX 3
PAR FUND REVIEW

Participating life insurance policies (par policies) are widely used to meet the investment and life protection needs of many policyholders.

Managing the par fund is intrinsically complex. There is a need to optimise returns to policyholders while not exposing the par fund to excessive risks. Insurers also have to maintain equity and fairness among different classes and generations of policyholders. This is further complicated by the increasingly volatile investment climate and increasingly complex product designs.

The Par Fund Review Workgroup was formed to recommend measures to strengthen the management of par funds, particularly the internal governance and disclosure standards of this type of business. It comprises representatives from the life insurance industry, Singapore Actuarial Society and MAS. The workgroup is finalising the details of the recommendations following feedback received from the public consultation in February/March 2005. It will work with the Life Insurance Association (LIA) to incorporate changes to the current industry guidelines. MAS will also issue a new notice on par fund management which will set out the mandatory requirements.

The key recommendations are:

  • Put in place a clearly defined and well-documented internal policy on par fund management, which is approved and reviewed regularly by the Board of Directors.
  • Introduce measures to improve point-of-sale and post-sale disclosure, including the provision of relevant information on investment strategy, key factors affecting future bonuses and key principles applied in bonus allocation in the product summary.
  • Train financial adviser representatives selling par policies on the new measures to ensure that they are competent and able to provide well-considered advice to consumers