MAS Amends Risk-Based Capital Framework Requirements for Insurers

The circular states that review of the valuation and capital framework for insurers in Singapore (RBC 2 review) has gone through extensive rounds of public and industry consultations as well as quantitative testing. The circular also informs that the relevant legislation to give effect to the enhanced valuation and capital framework (RBC 2) has been finalized. In this context, MAS has issued the Insurance (Valuation and Capital) (Amendment) Regulations 2020 to amend the existing Insurance (Valuation and Capital) Regulations 2004. The main changes relate to the introduction of two solvency intervention levels and the associated supervisory actions for not meeting these levels, in addition to the requirement to meet the fund solvency requirement at a broader adjusted fund instead of the insurance fund level.

Notice 133 has also been issued following the RBC 2 review and comprises both mandatory requirements and guidelines on the supervisory intervention levels, valuation of policy liabilities in respect of life business and general business, and the calculation of the total risk requirements and financial resources. Notice 319 and the Guidelines ID 1/04 on Valuation of Policy Liabilities of General Business will be cancelled once MAS Notice 133 takes effect, since relevant requirements and guidance on valuation of liabilities have been incorporated into MAS Notice 133. MAS will issue updated guidelines on the preparation of the actuarial investigation report (as required under Section 37(1) of the Insurance Act) in the second quarter of 2020. Insurers should reference the revised guidelines in preparing actuarial investigation reports that are to be submitted by March 31, 2021. The Notice takes effect on March 31, 2020, with the exception of section 6.4 and paragraph 10 in Appendix 5E, which shall take effect on January 01, 2022.

The statutory returns for the quarter ending March 31, 2020 are to be prepared on RBC 2 basis and are due on April 21, 2020. Consequential amendments will be made to the relevant legislation to include references to MAS Notice 133 as well as update references as a result of amendments to the Valuation and Capital Regulations, where applicable. These amendments will be finalized and issued next week. MAS will be sending letters, where relevant, to insurers in respect of RBC 2 related issues which are applicable to the insurer, such as any applicable capital add-on, approval of the use of matching adjustment and updates on exemptions granted under the previous capital framework. As communicated in Circular No. ID 03/20, insurers are to submit the parallel-run results for the year ending December 31, 2019 to MAS by May 30, 2020. The completed workbooks, which have been shared earlier on January 21, 2020, should be submitted by the insurer via to the liaison officer in MAS, using AES 256 encryption or higher.

Effective Date: March 31, 2020

Keywords: Asia Pacific, Singapore, Insurance, Reinsurance, MAS Notice 133, Risk-Based Capital, RBC 2, Capital Adequacy, Valuation and Capital Regulation, MAS