Call Us +852 3113 1331

Singapore Assess Insurance Standards

Posted on Mar 29, 2012 by Sergio Ulloa ()

More changes could soon be underway in the Singaporean insurance market, with news emerging this week that the country's industry watchdog will likely raise capital requirements and corporate governance standards on domestic insurance companies over the next year. Speaking at the General Insurance Association's annual meeting on Tuesday, Lee Boon Ngiap, Assistant Managing Director for the Monetary Authority of Singapore (MAS), explained that his organization would soon be drafting a consultation paper that will put forward several new enhancements to the risk-based capital (RBC) framework used by Singaporean insurance companies.This will be the first time the country's RBC framework is subject to review since it's establishment in 2005. Singapore was one of the first countries in Asia to adopt a risk-focused capital evaluation service for insurance companies and while the system has served the market well, more should now be done to better align regulatory policies with evolving global market realities. According to Mr. Lee, MAS plan to use the upcoming review to improve the scope of the existing RBC framework, increasing both risk coverage and efficiency while also ensuring that any reform proposals remain practical to local insurers and the current market environment. Unlike the conventional banking sector, Lee noted that there are no common international capital standards for insurance companies. As a result, the MAS review will be quite an arduous task, requiring both a fundamental analysis of Singapore's current RBC framework and a comparative study of how insurance capital levels are monitored more effectively overseas. Singapore's insurance sector needs to keep pace with international regulatory reforms. While insurance companies have largely been able to weather the global financial crisis better than other financial institutions, lessons still must to be learned with regards to improving corporate governance, capital adequacy and risk management performance. MAS responded to this development by issuing market guidelines on best risk management and governance standards for insurance companies in 2007. These guidelines laid out sound business practices for each core insure activity, including product development, policy pricing and underwriting discipline, for local companies to look to if need be. Going forward however these practices will no longer be optional. In a bid to further improve corporate governance standards, MAS recently drafted a proposal to extend the Insurance Corporate Governance Regulations to all locally-incorporated insurers. According to Mr. Lee, the MAS now intend to make it mandatory for all locally-incorporated general insurance companies in Singapore to maintain certain minimum corporate governance requirements. These regulations will be adjusted to take into account the size and complexity of a given insurer's operations. Compliance with these corporate governance standards will be assessed as part of the MAS' ongoing insurance supervisory programme. Another part of the MAS' plan to improve domestic insurer risk management will see the introduction of new rules governing enterprise risk management (ERM) in Singapore. ERM is becoming an ever more important tool for both international and local business strategy. In Mr Lee's speech, he explained that the new ERM standards will both update the existing risk portfolio and take account of MAS' input on how insurers should identify and manage interdependencies between key risks going forward. These moves could in turn have a ripple effect on both strategic management and capital planning actions across the entire market. The MAS reforms come on the back of a particularly productive year for Singapore insurance companies. Mr Lee was quick to commend the work done by the General Insurance Association (GIA) in raising insurance agent recruitment standards, educating and advising consumers and further assisting MAS in its regulatory work. According to the GIA's year-end statistics, the country's general insurance market grew by a sound 4.5 percent in 2011, with total gross premiums hitting S$3.17 billion (US$2.5 billion). This premium growth accompanied a surge in profitability across all lines of domestic non-life business. The GIA reported that total underwriting profits rose by 25 percent year-on-year, from S$198.1 million (US$157.2 million) in 2010 to S$248.3 million (US$196.9 million) to 2011.This upsurge in profitability was driven by the performance of Singapore's motor insurance segment, which surprised many by finishing in the black for the first time in 6 years. In addition to general insurers, life and long-term insurance providers also enjoyed a fruitful 2011 in Singapore. The latest report issued by the Life Association of Singapore (LIA) showed that the country's life insurance sector grew by a hefty 22 percent in 2011. New business premiums in the life sector also managed to pass the S$2 billion mark for the first time. While Singapore's insurance industry will continue to be affected by global economic uncertainty, the rising protection and savings needs of the nation's rising middle-class population should provide domestic insurers with enough business momentum to achieve premium growth going forward. The insurers meanwhile need to maintain disciplined underwriting, pricing, and sound corporate governance if they wish to survive and perhaps even thrive on the global stage going forward. Organizations Mentioned GIA GIA LOGO Founded in 1965, the General Insurance Association works to represent and promote the interests of all non-life insurance companies in Singapore. LIA LIA LOGO Established in 1962, the Life Insurance Association works to further develop Singapore's life insurance industry. Since its establishment, the organization has launched public education initiatives, improved industry guidelines, conducted valuable market research, and held numerous conferences and seminars for the professional development of the industry. MAS TheMAS The Monetary Authority of Singapore (MAS) serves as the country's central bank. Established in 1970, MAS has since come to supervise aspects of Singapore's financial sector, including banking, insurance, securities and monetary policy.
Be Sociable, Share!