8 Aug 1999... MAS today issued Notices on financial reinsurance to general insurers and life insurers. The Notices set out MAS' stance on the definition and use of financial reinsurance. They also provide guidelines on the application of risk transfer rules and accounting treatment, as well as disclosure requirements pertaining to financial reinsurance.

MAS said that financial reinsurance, as an alternative to traditional reinsurance, is increasingly gaining significance as a component in insurance companies' approach to total risk management. The use of financial reinsurance, which represents a combination of risk transfer and risk financing, could provide additional flexibility and liquidity to an insurer's risk management programme.

Mrs Lim Shu Chiau, Executive Director of MAS' Insurance Department, said that the new Notices aims to ensure clarity and consistency in the accounting treatment of financial reinsurance, and provide users of financial statements with adequate information to assess the financial positions of insurers. She added that having a conducive legal and regulatory environment is important for new activities such as financial reinsurance to thrive.

"Singapore is committed to put in place a sound regulatory framework in line with international best practice that will allow insurers in Singapore to provide the full range of financial and insurance services. This will help develop Singapore as a major insurance centre," said Mrs Lim.

Under the new guidelines, direct and captive insurers that engage in financial reinsurance transactions in respect of life business would need to obtain prior approval from MAS. However, this requirement does not apply to financial reinsurance transactions pertaining to general business. MAS said that a more cautious approach is needed for life business as a substantial portion of Singapore's life business is participating business, where investment and expense risks are largely borne by the policyholders. Furthermore, life business is generally long-term in nature.

The Notices were developed by a working group comprising representatives from the Monetary Authority of Singapore (MAS), the insurance associations and the Institute of Certified Public Accountants of Singapore (ICPAS). The working group was set up in May 1998 in response to the recommendation by the Finance and Banking Sub-Committee to enhance Singapore's competitiveness as a reinsurance centre.

For reference to the Notices on Financial Reinsurance, please refer to

MAS Notice 208 : Notices on Financial Reinsurance to General Insurers (22.3 KB)

MAS Notice 316 : Notices on Financial Reinsurance to Life Insurers (32.2 KB)