ROBUST, TRUSTED, AND
PURPOSEFUL FINANCIAL CENTRE
- A ROBUST FINANCIAL CENTRE
- International Supervisory Cooperation
- Box 1: International Monetary Fund's Financial Sector Assessment Programme
A ROBUST FINANCIAL CENTRE
Enhanced Macroprudential Framework
In 2011, MAS carried out a pilot study based n a group of larger insurers to establish a macroprudential surveillance framework for insurers. Since then, MAS has collected more granular data on all insurers'3 assets and liability exposures on a regular basis through MAS Notice 122. This allowed MAS to extend the macroprudential surveillance framework to the entire insurance industry and conduct more comprehensive analysis of the insurance sector's vulnerabilities, as well as the interconnectedness and linkages with the economy, financial markets and other financial intermediaries.
Risk Based Capital Framework
MAS is reviewing its Risk Based Capital Framework (RBC 2) for insurers to keep pace with evolving market practices and global regulatory developments. The review aims to improve the comprehensiveness of risk coverage and the risk sensitivity of the framework, as well as define more clearly MAS' supervisory approach with respect to the solvency intervention levels. The review has taken into account the practices of major jurisdictions as well as the risk profile of the Singapore insurance sector.
MAS issued its second consultation paper in March 2014, following the first consultation that set out the broad direction of the RBC 2 review about two years ago. The latest consultation paper revisited several earlier proposals, taking into consideration responses received for the first consultation paper. The consultation paper also contained technical specifications of a first quantitative impact study (QIS 1) to be conducted by the insurers, in order for insurers to understand the full impact of the proposals.
The key proposals include:
- Introduction of a matching adjustment to the discount rate for life insurers;
- Recalibration of the risk requirements to a consistent target criterion i.e. Value at Risk (VaR) measure of 99.5% confidence level over a one year period;
- Recognition of diversification benefits between the insurance and asset risk requirements, as well as between some of the underlying risk requirements within these two categories of risk requirements; and
- Alignment of insurers' available capital components with those in MAS' capital adequacy framework for banks, wherever appropriate.
MAS expects to finalise the main features of the RBC 2 framework by 2014 and formally implement the RBC 2 requirements from 1 January 2017, subject to further consultation with the industry. MAS will continue to engage the industry closely on the review, especially on the implementation timeline and the transitional provisions.
Requirements on Key Persons
MAS amended the Insurance (Actuaries) Regulations (Actuaries Regulations) in April 2013 to expand the responsibilities of actuaries approved by MAS. Specifically, certain existing responsibilities of actuaries of direct life insurers were extended to actuaries of other types of insurers. These include the requirement to assist the insurer on matters such as investment policy and risk management, as well as to report to MAS and notify the insurer's board of directors if the insurer has failed to take appropriate steps to rectify any matter that has a material adverse effect on the insurer's financial condition. The amended Actuaries Regulations also provide for the actuaries to have free and unfettered access to the insurer's board of directors.
At the same time, a new MAS Notice 106 on Appointment of Directors, Chairman and Key Executive Persons was issued. The new Notice clarifies that insurers should ensure that approved persons meet the board of directors' approved fit and proper policy not only at the time of appointment but also on a continuing basis.