MAS Issues Notice on Enhanced Governance and Disclosure Framework for Participating Life Insurance Business
Singapore, 29 June 2007...The Monetary Authority of Singapore (MAS) today issued a Notice on an enhanced framework relating to the governance and disclosure of participating (par) life insurance business.
2 The new framework aims to strengthen insurers’ internal governance practices on the management of the par fund, and enhance disclosure standards to par policyholders. It incorporates the recommendations of the Par Fund Review Workgroup (Workgroup), comprising representatives from the insurance industry and MAS, which was formed to review the operations of par business in Singapore.
3 In formulating the new framework, MAS took into consideration the feedback from its public consultation on the recommendations of the Workgroup in March 2005. MAS also worked closely with the Life Insurance Association (LIA).
4 Under the new framework, life insurers are required to:
(i) Put in place board-approved internal governance policies on par fund management by 31 December 2007;
(ii) Provide more comprehensive product summaries at the point of sale with effect from 1 March 2008;
(iii) Provide summary reports to existing par policyholders on an annual basis, for bonus declarations taking place from 2008 onwards. The reports should show how the par fund has performed, the projected outlook and how the past experience and future outlook will impact bonuses to be declared in the future; and
(iv) Provide key figures, such as revised maturity value and maturity yield, whenever there are changes to the bonus rates being declared, or whenever it revises its estimates of future bonus rates. A full updated benefit illustration should be made available to par policyholders upon request.
5 Drawing upon the Workgroup’s recommendations, LIA would also issue revised disclosure guidelines on point-of-sale benefit illustrations for par policies. With effect from 1 March 2008, life insurers will need to prepare their benefit illustrations using two projected investment rates of return instead of one to highlight the volatility of future non-guaranteed bonuses.
6 Ms Teo Swee Lian, Deputy Managing Director of MAS, said, “Par policies are widely used by Singaporeans to meet their investment and life protection needs. Whilst there are sufficient prudential rules in place to safeguard the interests of par policyholders, the enhanced governance and disclosure framework will help to enhance consumer protection. MAS commends LIA for initiating a consumer survey on the proposed point-of-sale disclosure documents, and developing a consumer guide under the MoneySENSE banner to educate consumers on par policies. These would help provide consumers with adequate and relevant information without increasing compliance costs unnecessarily.”