25 February 2021

On 19 February 2021, the Monetary Authority of Singapore (“MAS”) released a consultation paper on Proposed Revisions to Enterprise Risk Management, Investment and Public Disclosure Requirements for Insurers. MAS is proposing revisions to MAS Notice 126 on Enterprise Risk Management, MAS Notice 125 on Investments of Insurers and MAS Notice 124 on Public Disclosure Requirements. These proposals concern enhanced requirements relating to the mitigation of systemic risk in the insurance sector, greater clarity on MAS’ expectations regarding oversight and investment activities of insurers, and enhanced public disclosure requirements in certain areas. The consultation closes on 19 March 2021.

Mitigation of systemic risks

MAS seeks to align its rules and regulations with the relevant updated Insurance Core Principles (“ICPs”) adopted in November 2019 by the International Association of Insurance Supervisors (“IAIS”), the international standard setting body for the insurance sector, by enhancing its current requirements relating to enterprise risk management, investment risk management and disclosure practices where appropriate. The requirements proposed by MAS are designed to strengthen insurers’ risk management practices, which include the enhancement of liquidity risk management and stress testing processes, and to help prevent insurance sector vulnerabilities and exposures from developing into systemic risks.

The ICPs reflect an enhanced set of supervisory policy measures to facilitate macroprudential surveillance by insurance regulators, which is a key feature of the Holistic Framework for Systemic Risk in the Insurance Sector (“Holistic Framework”) developed by the IAIS following an extensive review on policy measures that serve to mitigate systemic risk in the insurance sector. The Holistic Framework recognises that systemic risk may arise from both the collective activities and exposures of insurers at a sector-wide level as well as from the distress or disorderly failure of individual insurers. In particular, liquidity risk and interconnectedness (such as linkages via macroeconomic and counterparty exposures) were identified as key exposures that can have systemic impact.

Oversight and investment activities

Aside from the requirements relating to the mitigation of systemic risks, MAS is also proposing a separate set of amendments to MAS Notice 125 to provide more clarity on its expectations regarding oversight and investment activities of insurers.

Public disclosure requirements

MAS is also proposing to enhance the public disclosure requirements in MAS Notice 124 in the areas of investment risk, company profile information, technical provisions, and non-GAAP financial measures.

Reference materials

The consultation paper is available on the MAS website www.mas.gov.sg.