The Monetary Authority of Singapore (MAS) has proposed further revisions to the Risk-Based Capital (RBC) framework for insurers, taking into account feedback from the industry.

It will also conduct a second quantitative study to assess the impact of the revised proposals.

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The latest consultation paper sets out the revised proposals after taking into account the feedback received from the previous consultation in 2014. Some of the key revisions are as follows:

  • Capital requirements for equity investment, credit spread, counterparty default and operational risk have been re-calibrated downwards to more accurately reflect the risks they pose to insurers. 

 

  • The discounting of life insurance liabilities has been adjusted to reduce the impact of short-term volatility on insurers’ capital adequacy.  This will enable insurers to continue providing sustainable long-term insurance solutions to policyholders.

'More conducive environment'

MAS said the revised RBC framework will create a more conducive environment for insurers to invest in equities and long-dated bonds and offer long-term insurance products for policyholders.

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It said policyholders will benefit from better product pricing and asset allocation decisions made by insurers.

Chua Kim Leng, assistant managing director (banking and Insurance) of MAS, said: “Insurers in Singapore are well-capitalised. The purpose of the RBC 2 review is therefore not to raise regulatory capital requirements, but to ensure that our framework for assessing capital adequacy better reflects an insurer’s activities and risk profile.”

The consultation paper is available on the MAS website and comments should reach MAS by 20 October 2016.

Since the first consultation in 2012, MAS has been closely engaging relevant stakeholders in its review of the RBC framework to ensure that the framework remains relevant to industry’s needs while enhancing protection for policyholders.