MAS Invites Comments on Recommendations to Enhance Par Funds' Governance and Disclosure
Singapore, 22 February 2005...The Participating (Par) Fund Review Workgroup released a consultation paper on the draft recommendations to enhance par fund management and improve disclosure to par policyholders.
2 Participating life insurance policies (par policies) are widely used to meet the investment and life protection needs of many par policyholders in Singapore. Par policies allow policyholders to participate in the performance of the par fund in the form of non-guaranteed benefits. However, managing a par fund is intrinsically complex. Insurers are expected to exercise proper discretion when allocating bonuses. They should take into account the need to ensure fairness and equity among different cohorts of par policyholders and maintain the par fund's overall solvency, among other issues. This is further complicated by the increasingly volatile investment climate and more complex product designs.
3 In view of this, a Par Fund Review Workgroup, comprising representatives from the life insurance industry, the Singapore Actuarial Society and the Monetary Authority of Singapore (MAS), was formed to review the operations of par fund business in Singapore and to recommend measures to address any inadequacy.
4 The workgroup is of the view that there are adequate prudential rules and requirements to protect par policyholders' interests. However, the workgroup identified several inadequacies in the areas of internal governance and quality of disclosure to policyholders, both at the point-of-sale and on a regular basis after sales.
5 This consultation paper sets out recommendations to address the inadequacies identified by the workgroup. In addition, the workgroup also proposed that financial adviser representatives selling par policies be adequately trained on the new measures proposed. MAS would like to seek public comments on the proposed recommendations. Interested parties may email their comments to firstname.lastname@example.org by 28 March 2005.