28 October 2022

On 30 September 2022, the Monetary Authority of Singapore (“MAS”) issued amendments to MAS Notice 126 on Enterprise Risk Management, MAS Notice 125 on Investments of Insurers and MAS Notice 124 on Public Disclosure Requirements. These amendments, which will take effect on 1 January 2023, comprise 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 amendments follow a public consultation exercise held from 19 February 2021 to 19 March 2021 on the proposed amendments. On 30 September 2022, MAS issued its response to the feedback received. The following are some of the key points from MAS’ response.

MAS Notice 126

Macroeconomic stress testing

While MAS Notice 126 states that an insurer should perform its Own Risk and Solvency Assessment (ORSA) with a time horizon that is consistent with that used in its business planning, MAS clarified that the time horizons used need not necessarily be the same for the base and stress scenarios. In practice, an insurer has the flexibility to use time horizons which are appropriate to its risk profile and business strategy.

Liquidity risk management

In response to feedback on the scope of assets to be included in the portfolio of unencumbered liquid assets, MAS said that liquidity sources such as bank credit/liquidity facilities and projected capital injections should not be included.

MAS received feedback that the exclusion of corporate debt and equity securities issued by financial firms from the portfolio of liquid assets may be overly conservative and may result in certain unintended consequences. MAS said in its response that such assets may be included as part of the secondary bucket in the portfolio of unencumbered liquid assets for liquidity stress testing purposes if insurers have assessed that such assets meet the characteristics of liquid assets. This assessment should be documented and a higher haircut should be applied to these assets relative to similar assets issued by non-financial firms.

MAS Notice 125

MAS has included guidance on elements that could be included in a counterparty risk appetite statement in the revised Notice 125. The guidance provided is in line with the published guidelines on risk management practices for credit risk to guide financial institutions (including insurers) on managing credit risk and establishing appropriate limits to control concentration risk.

MAS Notice 124

MAS noted insurers’ concerns about the confidentiality of the information to be disclosed. Nonetheless, some aspects of the proposed additional disclosures relating to liquidity and investment risks are already in the financial statements as required under the accounting standards. MAS also said that there should not be a concern on proprietary or confidential information being disclosed with respect to these disclosures. Where any information required for disclosure is deemed by an insurer to be either proprietary or confidential in nature and such disclosure would seriously prejudice the interest of the insurer, the insurer need only disclose general information about the subject matter of the requirement.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg: