MAS unveils revisions to risk-based capital framework for insurers

Counterparty default, operational risk were re-calibrated downwards.

It’s insurers’ lucky day, as the Monetary Authority of Singapore (MAS) has unveiled proposed revisions to the Risk-Based Capital (RBC) framework for insurers after taking into account feedback from the industry.

According to a news release by MAS, some key revisions include 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.

In addition, the discounting of life insurance liabilities has been adjusted to cushion the blow of short-term volatility on insurers’ capital adequacy. This will allow insurers to continue providing sustainable long-term insurance solutions to policyholders.

The revised RBC framework will create a more conducive environment for insurers to invest in equities and long-dated bonds, asserts MAS. Also, the new framework will offer long-term insurance products for policyholders. Policyholders, in turn, reap the rewards of improved product pricing and asset allocations decisions made by insurers.

MAS reports it will also conduct a second quantitative study to revised proposals’ impact.

"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,” comments Chua Kim Leng, Assistant Managing Director (Banking & Insurance) of MAS.

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