MAS Press Statement on The Gazette Of The Insurance (Amendment) Regulations 1998
27 Feb 1998... The Insurance (Amendment) Regulations 1998 takes effect on 27 Feb 1998. The regulations prescribe revisions to the investment limits, introduce new permitted counterparty exposure limits, and provide clarification on the valuation of unit trusts. The amendments, which apply to the Singapore general insurance and non-linked life insurance funds of registered insurers and reinsurers, have been finalised after feedback obtained from the insurance industry.
2 The investment limits for investment-linked life insurance funds are currently being reviewed.
3 The liberalisation of the investment limits will accord insurers greater flexibility to invest in equities and foreign assets. However, in view of the uncertainty prevailing in the region, insurers should exercise prudence and caution in making their investment decisions.
New Investment Limits
4 Details of the revisions are as follows:
Aggregate limit on investments in equities increases from 35% to 45%. Investments in unit trusts are deemed as investments in equities and included in the computation of this limit;
A limit of 10% is imposed on investment in any one unit trust;
Aggregate limit on investments in property and property shares increases from 20% to 25%;
Admitted value of investments in foreign currency denominated and overseas assets increases from 20% to 30%. The current limit of 20% remains for foreign assets that may not be of investment grade. The additional 10% of foreign assets must be in the form of foreign currency deposits with an approved financial institution, foreign currency fixed income securities graded AA and above, and equities listed on any stock exchange;
Total investments in loans to and securities of any one company or group of companies related to one another increases from 5% to 10%, subject to a sub-limit of 5% on investments in one unlisted company or group of unlisted companies related to one another; and
Admitted value of deposits placed with any one approved financial institution or group of approved financial institutions related to one another increases from 15% to 20%.
Permitted Counterparty Exposure Limits
5 Derivative and off-balance sheet transactions can lead to exposures to counterparties. To address concerns over concentration of risks to any single counterparty, the regulations imposed the following limits:
20% where the counterparty is an approved financial institution (or group of approved financial institutions related to one another);
10% where the counterparty is a company listed on any stock exchange (or group of companies related to one another); and
5% in all other cases.
Valuation of Unit Trusts
6 The regulations also clarify that unit trusts and quoted equities are to be valued on a combined basis, based on the lower of the aggregate of their costs or the aggregate of their market values.