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SINGAPORE – Four insurers have been named as “systemically important” to Singapore, in a new move that will subject them to higher regulatory standards and closer supervision, given that their collapse would significantly affect the country’s economy.
They are AIA Singapore, Income Insurance, Prudential Assurance Company Singapore and Great Eastern Life Assurance Company.
The Monetary Authority of Singapore, in unveiling its first list of domestic systemically important insurers (D-SII) on Thursday, said the requirements will kick in on Jan 1, 2024.
Its deputy managing director for financial supervision Ho Hern Shin said: “Enhancing the D-SII framework is part of MAS’ continuous efforts to strengthen the resilience of Singapore’s financial sector.”
Currently, the framework is in place for seven domestic systemically important banks: Citibank, DBS, UOB, OCBC, Standard Chartered, Maybank and HSBC.
Under the framework, the four insurers will be subject to additional supervisory measures, which largely mirror those applicable to domestic systemically important banks.
Besides more intensive supervision, they will have to meet higher capital requirements to buffer losses.
They must also have a recovery and resolution plan, as well as robust management information systems.
A recovery plan would bolster an insurer’s ability to restore its financial strength and viability in a period of distress, said MAS, while a resolution plan would enhance the regulator’s ability to ensure the timely and orderly restructuring or exit of an insurer if it fails. This will minimise the impact to the financial system and economy.
Given their current capital positions, the four insurers are expected to continue meeting the capital requirements under the framework with adequate buffers.
The four insurers were identified as systemically important based on four factors: Size; interconnectedness with other parts of the financial system and the economy; substitutability, which refers to the ability to be replaced; and business, structural and operational complexities.
MAS uses the share of Singapore Insurance Fund (SIF) total assets and share of SIF gross written premiums as measures of an insurer’s size.
Basically, the larger the firm and its share of domestic activity, the higher the likelihood that its failure or distress will negatively affect the domestic economy and financial markets.
The thresholds for each indicator will be carefully adjusted to take into consideration annual industry data, though MAS does not disclose the thresholds used.
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