15 July 2002, Singapore. Deputy Prime Minister and MAS Chairman Lee Hsien Loong today delivered the keynote address at the 38th annual seminar of the International Insurance Society (IIS). The IIS seminar, which is being held from 14-17 July 2002, brings together more than 450 senior insurance industry practitioners from around the world.

2   In his keynote address, Mr Lee said that since MAS opened up the local insurance industry to competition two years ago, insurers and industry associations, together with MAS have been working to strengthen the resilience of the insurance industry by raising standards of corporate governance, internal controls and professionalism.  MAS' aims to have all Singapore insurers attain best practice standards by 2005, if not earlier.

3   Insurers have also taken several measures to enhance their competitiveness.  They have sharpened their business focus, moved into higher-value added areas and improved professional standards.

4   Mr Lee outlined several important new initiatives:

Strengthening Corporate Governance:

Mr Lee said that the MAS has been working on a draft corporate governance framework for the insurance industry. This is aimed at raising standards of corporate governance, internal controls and professionalism. Guidelines will be issued for internal governance for local boards of directors, as well as guidelines for the roles and responsibilities of Principal Officers of insurance companies.

Health Insurance:

Mr Lee noted that health insurance was an important emerging opportunity in Singapore. MAS plans to introduce a regulatory framework for health insurance in 2003 and will be seeking industry feedback on this.

Risk-based Supervisory Framework:

MAS has established the basic framework for risk-based supervision of the insurance industry. Mr Lee said that the MAS is now developing risk profiles for each Singapore-based insurer. A five-step "supervisory ladder of intervention" has been devised and this will be used to classify insurers according to their risk rating.

Risk-based Capital Requirements:

Mr Lee said that MAS has formed two work-groups comprising industry specialists, representatives of professional associations and regulators to develop a risk-based capital framework for life and non-life insurance. Besides refining the treatment of liability risk, MAS will look at capital charges for asset risks.  The new capital requirements should also provide an early indicator of financial weaknesses, and thus facilitate progressive intervention by regulators. These risk-based capital requirements will be introduced by end-2003.

Raising Professional Standards:

MAS is also reviewing the manpower capabilities of the insurance industry and will identify the main competency gaps and areas of weakness.  MAS will work with industry to formulate an insurance manpower development strategy. 

5   Mr Lee said that MAS would continue to work together with the insurance industry to achieve international best practice and standards. "Over the past two years, MAS has worked hard to build a closer partnership with the financial sector. We will continue to promote an open environment and consult actively with the private sector for its views. The relationship between the regulator and the regulated should be arms length but not adversarial. The regulator has to be firm, but also friendly," Mr Lee said.

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