MAS Issues Technical Specifications for RBC2 Parallel Run for Insurers

This set of technical specifications sets out the updated policy positions on the RBC 2 framework on matching adjustment, illiquidity premium, and recognition of internal credit rating model or process for unrated corporate bonds. All insurers, with the exception of captives, Lloyd’s insurers and marine mutuals, are required to conduct the parallel run for the year ended 31 December 2018, based on the instructions set out in the technical specifications. Key changes to the previous technical specifications have been highlighted. There remain but a few areas, such as the treatment of infrastructure investments and securitized assets and calibration of the general insurance catastrophe risk requirement, which MAS intends to consult with the industry in due course this year. So far, MAS has conducted three rounds of impact studies on the RBC 2 proposals. The most recent impact study was conducted from September to November 2018. All insurers (with the exception of captives, Lloyd’s insurers and marine mutuals) participated in the 2018 impact study. MAS expects to conduct a final parallel run for the year ended December 31, 2019.

Locally incorporated reinsurers, which are headquartered in Singapore (where MAS is the home supervisor), are to assume that RBC 2 will be applied immediately on its offshore insurance funds as well as its branches for the purpose of the parallel run based on the December 31, 2018 valuation date. Locally incorporated reinsurers that are headquartered overseas (where MAS is not the home supervisor) will continue to be subject to the current simplified solvency requirements, while reinsurance branches will be exempt from solvency requirements for the offshore insurance fund.

Keywords: Asia Pacific, Singapore, Insurance, Risk-Based Capital, Capital Adequacy, RBC 2, Parallel Run, MAS