Singapore: New Head of Insurance at MAS

Ms Lee Keng Yi is now the new Head of Insurance at the Monetary Authority of Singapore (MAS). She takes over from Ms Loo Siew Yee who is now Head of Banking Department 1 at the MAS.

Opportunities for greater integration across regional markets (Singapore regulator)

SINGAPORE: Infrastructure financing and insurance are two areas where there is greater potential for integration across regional markets, Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore said on Wednesday (Nov 5).

She highlighted this point at a conference on developing Asia's capital markets. Ms Loh added that regulators have a role in facilitating integration, which can enhance long-term growth prospects in Asia.

Source: Channel News Asia

MAS highlights scope for greater engagement between govt and insurance industry

There is scope for greater engagement between governments and the insurance industry in the areas of risk financing and insurance.

At the Asia Insurance & Reinsurance Conference on Wednesday, Assistant Managing Director of the Monetary Authority of Singapore Ng Nam Sin said the private sector can provide expertise and capacity to help governments manage large and complex risks.

Asia's growing and rapidly ageing population, rising affluence and rapid urbanisation are set to offer opportunities for insurers.

To access these opportunities, insurers to be be located in Asia to be close to the risk and support sound underwriting decisions. Insurers also need to achieve a deep understanding of the underlying risks. Companies will also need to identify, develop and retain the right talent.

He added that Singapore can play a role in facilitating international insurance companies in accessing Asia and fostering dialogue among stakeholders.

- CNA/ac

Source: Channel News Asia

Keep commission model, say financial advisers, managers

SINGAPORE - An ad-hoc alliance of about 15,000 financial advisers and managers are hoping to sway a review panel, which is considering, among other things, doing away with the commission model that most insurance and financial advisory firms use.

The alliance is arguing that the move towards a fee-only model - essentially a fixed fee for advisory services - would endanger the livelihood of the financial advisers. 

It is also refuting an assertion by Monetary Authority of Singapore (MAS) Managing Director Ravi Menon that the commissions can amount to 160 per cent of the annual premium of a product. 

The alliance includes the Insurance and Financial Practitioners Association of Singapore and insurance firms, among others.

Read full text: http://www.todayonline.com/Singapore/EDC120829-0000048/Keep-commission-model,-say-financial-advisers,-managers

Great Eastern and Aon reprimanded by MAS for failing to ensure their employees met the minimum exam requirements

The Monetary Authority of Singapore (MAS) has reprimanded two companies for failing to ensure their employees met the minimum exam requirements of the Financial Advisers Act.

Great Eastern Life Assurance and Aon Consulting contravened FAA-N07 and FAA-N13, the regulator said, by respectively allowing Ng Chai Ching and Alicia Kang Yee San to arrange life insurance contracts without attaining the correct qualifications.

Ng and Kang, who were reprimanded in separate notices from the MAS, have since addressed the breach by passing Module 5 of the Capital Markets and Financial Advisory Services Examination.

Great Eastern and Aon have carried out remedial actions in respect of customers for whom insurance contracts were arranged during the periods of breach, the regulator added, and both companies have put in place policies designed to prevent similar contraventions.

Read more: International Adviser

LIA Press Statement in response to MAS' Mystery Shopping Survey Findings

The Life Insurance Association Singapore (LIA) provides guidelines on the sales advisory process for life insurance products as well as the requirement for certain product disclosure documents. In the sales advisory process, insurance advisers are required to offer a choice of fact-find options, namely, full advice, partial advice, product advice or no advice.
  
Proportions of sales based on full or partial fact-find process have increased. In 2011, 74 per cent of life insurance policies purchased were based on full (10 per cent) or partial (64 per cent) fact-find as selected by the clients.

We note the specific findings of the MAS mystery shopping survey and the shortcomings, which require the industry's further attention.

The LIA supports the recommendation for industry to undertake mystery shopping exercises. We see this as a further initiative to enhance the effectiveness of the life insurance sales advisory process.

A recent consumer survey commissioned by the Life Insurance Association also provides insight. Door-to-door interviews of 800 respondents representing Singapore’s demographics were conducted between November 2011 and January 2012 by an independent market research company.

A majority of Singaporeans and permanent residents perceive the Singapore industry well and trust the life insurance representatives who serve them.

• 72 per cent are “Very Satisfied” and “Satisfied” with the life insurance industry as a whole.
• 69 per cent of Life Insurance Users rely on only one trusted agent.
• 92 per cent of Life Insurance Users who went through a full/partial fact-find in the past 3 years say they benefited from the process.

The LIA survey shows that consumers who have an on-going relationship with a representative are generally well served.
   
Both LIA and member companies will continue to support MoneySENSE initiatives as well as contribute in various ways toward raising financial literacy levels among Singaporeans.
 
Tan Hak Leh
President, LIA

Source: http://www.lia.org.sg/node/3200

Regulator releases a consultation paper on review of Risk-based capital framework in Singapore

RBC 2 Review: June 22nd 2012, MAS released a consultation paper on review on Risk-Based capital framework for insurers in Singapore. The aim is to enhance the original RBC framework, first introduced in 2004. The primary objective of the review is to address more risk types as well as to better align the framework with the upcoming Basel III regulations for banks. 

Following were the proposals raised in the paper. MAS proposes to implement the RBC 2 requirements for the accounting year ending 31 December 2013. There will be at least 2 years of parallel run with the existing RBC framework and appropriate floors imposed to prevent sudden release in capital requirements.

Proposal 1: MAS proposes to incorporate an explicit risk charge to capture spread risk within the RBC 2 framework.

Proposal 2: MAS proposes not to impose an explicit risk charge for liquidity risk. MAS will work with the industry to conduct liquidity stress-testing, and assess the soundness of the insurer's liquidity risk management practices as part of MAS‟ risk-based supervision.

Proposal 3: MAS proposes to incorporate an explicit risk charge to capture operational risk within the RBC 2 framework, calculated as: x% of the higher of the past 3 years‟ averages of (a) earned premium income; and (b) gross policy liabilities, subject to a maximum of 10% of the total risk requirements. Where x = 4% (except for investment-linked business, where x = 0.25% given that most of the management of investment-linked fund is outsourced)

Proposal 4: MAS proposes to incorporate an explicit insurance catastrophe risk charge in the RBC 2 framework. This would be done through prescribing a number of man-made and natural catastrophe scenarios, with an explicit risk charge computed accordingly from a combination of these scenarios. MAS intends to work with the industry associations, reinsurance brokers and the other risk institutes/academia in Singapore to design relevant standardised catastrophic scenarios. For life business, the explicit insurance catastrophic risk charge can be derived based on a pandemic event.

Proposal 5: MAS proposes to recalibrate risk requirements using the Value at Risk (“VaR”) measure of 99.5% confidence level over a one year period. MAS will be engaging the industry on the calibration exercise, and target to finalise the calibration factors/shock scenarios by 1Q 2013. Data would need to be collected for this purpose. The recommended calibration factors or scenarios will be consulted prior

Proposal 6: MAS proposes not to allow for diversification benefits when aggregating the capital risk requirements. MAS is, however, prepared to consider diversification benefits if the industry is be able to substantiate, with robust studies and research conducted on the local insurance industry, that there are applicable correlations which can relied on during normal and stressed times.

Proposal 7: MAS proposes to allow the use of partial or internal model in the next phase of the RBC 2 review, after the implementation of the standardised approach. The internal model, which will be subject to approval by MAS, will have to be calibrated at the same level as the standardised approach.

Proposal 8: MAS proposes to incorporate the same Basel III features (i.e. equity conversion or write-down on breach of regulatory capital requirements) for the Approved Tier 1 resource. This means that instruments that qualifies as Approved Tier 1 resource must:

(a) automatically convert to ordinary share capital, as and when the insurer needs to absorb losses, and in any case, when the insurer breaches its regulatory capital requirement;

(b) be subject to write down as long as losses persist, as and when the insurer needs to absorb losses, and in any case when the insurer breaches its regulatory capital requirement.

The limits on the amount of Approved Tier 1 resource that can be recognised, as set out in the  existing Insurance (Valuation and Capital) Regulations 2004, will remain unchanged.

Proposal 9: MAS proposes to allow a part of the negative reserves to be recognised as a form of positive financial resource adjustment under Financial Resources. MAS will consult further on the amount to be recognised.

Proposal 10: MAS proposes to classify Aggregate of Allowances for Provision for Non-Guaranteed Benefits, where applicable, as a form of positive financial resource adjustment, rather than as a capital item.

This applies to an insurer maintaining any participating fund, and subject to the condition that the unadjusted capital ratio remains below the adjusted capital ratio, where:

Adjusted capital ratio, in relation to the insurer, means the ratio of the financial resources of the insurer (excluding the financial resources of any participating fund) to the total risk requirement (calibrated at 99.5% VaR over a one-year period) of the insurer (excluding such requirement arising from any participating fund); and Unadjusted capital ratio, in relation to the insurer, means the ratio of the financial resource of the insurer (including the financial resources of any participating fund) to the total risk requirement (calibrated at 99.5% VaR over a one-year period) of the insurer (including such requirement arising from any participating fund).

Proposal 11: PCR is the higher supervisory intervention level at which the insurer is required to hold sufficient financial resources to meet the total risk requirements which corresponds to a VaR of 99.5% confidence level over a one-year period. 

An insurer which breaches its PCR will need to submit a plan on how to restore its capital position within 3 months. If the PCR is met, MAS will not normally intervene on capital adequacy grounds. This does not preclude MAS from requiring an insurer to maintain financial resources above the PCR if there are other supervisory concerns.

As a countercyclical measure, MAS will have the flexibility and discretion to allow insurers more time to restore its capital position, for example, during periods of market stresses.

PCR needs to be maintained at both the company level, as well as at an insurance fund level.

Proposal 12: MCR is the lower supervisory intervention level at which the insurer is required to hold sufficient financial resources to meet the total risk requirements which corresponds to a VaR of 90% confidence level over a one year period. If an insurer breaches its MCR, MAS may choose to invoke the strongest supervisory action (such as stopping new business, withdrawal of licence etc). MCR will be calibrated as a fixed percentage of the PCR. This percentage will be determined after quantitative impact studies are done. MCR needs to be maintained at both the company level, as well as at an insurance fund level.

Proposal 13: MAS proposes the following two approaches with regards to the risk-free discount rate for SGD-denominated liabilities.

(a) To keep to the same LTRFDR formula as set out in paragraph 5.5, but X and Y will now be 20 and 30 respectively. This is on the expectation that the 30-year SGS will have adequate liquidity when RBC 2 is implemented. This means:

- Durations 0 to year 20: Use prevailing yields of SGS 

- Durations 30 year and above: 90% of historical average yields (since inception) and 10% of latest 6-month average yield of 30-year SGS

- Durations 20 to year 30: Interpolated yields  

- Durations 30 year and above: Keep the yield flat at the prevailing yield of 30-year SGS

(b) To remove the LTRFDR formula altogether, ie.,

- Durations up to 30 Years: Use prevailing yields of SGS

Proposal 14: MAS proposes that insurers follow the regulatory requirements pertaining to discounting as prescribed by the insurance supervisory authority in the jurisdiction issuing the currency, for valuing non-Singapore dollar denominated liabilities for both life and general business.

Proposal 15: MAS proposes to extend the discount rate requirements for life business to general business as well, for liability durations above 1 year. For liability duration of 1 year and less, no discounting would be required.

Proposal 16: MAS proposes to introduce Enterprise Risk Management requirements, including those relating to Own Risk and Solvency Assessment, to insurers. We will consult industry on the ERM requirements and target to issue a final document by end of 2012.

http://www.mas.gov.sg/resource/publications/consult_papers/2012/CP_RBC2_20120621.pdf

Panel for financial advisory industry review unveiled

SINGAPORE - The Monetary Authority of Singapore (MAS) has announced the composition of the review panel for the Financial Advisory Industry Review (FAIR).


It will be chaired by MAS' Assistant Managing Director for Capital Markets, Mr Lee Chuan Teck, and comprise representatives from industry associations, consumer bodies, the investment community, academia, media, and other stakeholders


The panel will review and propose recommendations on the five key thrusts of FAIR, which was announced by MAS managing director Ravi Menon last week. 


The review aims to: raise the competence of financial advisory (FA) representatives; raise the quality of FA firms; make FA a dedicated service; lower distribution costs; and promote a culture of fair dealing.


The panel members are: 


Chairman: Mr Lee Chuan Teck, Assistant Managing Director, MAS


Members:
Mr Esmond Choo, President, Securities Association of Singapore
Ms Genevieve Cua, Wealth Editor, The Business Times
Mr David Gerald, President, Securities Investors Association (Singapore)
Mr Lester Gray, Chairman, Investment Management Association of Singapore
Mr Piyush Gupta, Chairman, The Association of Banks in Singapore
Ms Aurill Kam, Partner, Rajah & Tann LLP
Professor Francis Koh, Deputy Dean, Lee Kong Chian School of Business, SMU
Mr Kuo How Nam, President, Credit Counselling Singapore
Mr Augustine Lee, President, Association of Financial Advisers
Mr Ong Ye Kung, Deputy Secretary-General, National Trades Union Congress
Mr Seah Seng Choon, Executive Director, Consumers Association of Singapore
Mr Tan Hak Leh, President, Life Insurance Association Singapore
Mr Yee Ping Yi, Chief Executive Officer, Central Provident Fund Board


Consumer and industry practitioners are invited to submit feedback and respond to a questionaire for the review by May 1. General comments may be emailed to fairfeedback@mas.gov.sg. The FAIR questionaire can be found at www.mas.gov.sg/fair. A hardcopy response to the questionaire can also be mailed to 10 Shenton Way, MAS Building, Singapore 079117, marked for the attention of "Capital Markets Intermediaries Department - FAIR"


Source: Today Online 

Veteran insurance agents in Singapore reeling from potential industry changes.

SOME of the most senior and well-established insurance agents were left reeling by the sweeping changes proposed by the regulator to the life insurance industry last night.

This is because these established agents, who are at the managerial and director levels, derive a substantial part of their income from the commission-based structure currently in place. A senior insurance manager, who declined to be named, said: “There are serious financial implications. I am not sure if I will be losing my job soon.”

Insurance bosses were also worried about what the changes would mean for their ability to retain talent at the senior levels.

Mr Khoo Kah Siang, general manager of Great Eastern Life, said: “It is important that we have an industry that is able to attract people. The question is, what is the best structure? “Perhaps there could be some tweaks to the tiered structure, and working together with the regulators, maybe we can help to come up with a structure that is workable both for the industry and the consumer.”
Their concerns come as the Monetary Authority of Singapore (MAS) yesterday said that it is looking to review how the insurance industry pays its 13,000 agents.

MAS managing director Ravi Menon, who spoke last night at the Life Insurance Association 50th Anniversary dinner, said MAS was looking to review the multi-tiered distribution structure.



Read more: BT invest