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SINGAPORE: AIA Singapore, Income Insurance, Prudential Assurance and Great Eastern Life have been designated domestic systemically important insurers, in an inaugural list published by the Monetary Authority of Singapore (MAS) on Thursday (Sep 21).
Insurers whose failures are assessed to have a significant impact on the financial system and the broader economy in Singapore will be formally designated as domestic systemically important insurers, said MAS in a press release.
They will also be subjected to additional supervisory measures, which largely mirror those applicable to domestic systemically important banks, such as DBS, OCBC and UOB.
These measures include higher capital requirements for insurers. A 25 per cent capital add-on will apply, increasing its higher and lower supervisory intervention levels, as well as Common Equity Tier 1 and Tier 1 capital requirements.
Common Equity Tier 1 capital represents the highest quality capital, which includes paid-up capital, retained earnings and insurance funds surpluses. Tier 1 capital comprises Common Equity Tier 1 capital and additional Tier 1 capital instruments, said MAS.
The add-on replaces the 25 per cent high impact surcharge applicable to the four insurers under the existing framework, said MAS.
Another measure includes recovery and resolution preparedness.
“Recovery planning will bolster an insurer’s ability to restore its financial strength and viability in a period of distress,” said MAS.
“Resolution planning will enhance MAS’ ability to ensure the timely and orderly restructuring or exit of an insurer if it fails, so as to minimise impact to the financial system and economy.”
The four companies are expected to continue meeting the capital requirements under the new framework with adequate buffers, said MAS, adding that it is engaging the four firms on recovery planning.
The framework for domestic systemically important insurers will come into effect on Jan 1 next year. It formalises and updates an existing framework and will “facilitate the annual impact assessment of insurers based on their size, interconnectedness, substitutability and complexity”.
MAS’ deputy managing director of financial supervision Ho Hern Shin said: “Enhancing the (domestic systemically important insurers) framework is part of MAS’ continuous efforts to strengthen the resilience of Singapore’s financial sector.
“It ensures that domestic systemically important insurers are subject to higher regulatory standards and closer supervision.”
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