29 November 2022

On 26 October 2022, the Monetary Authority of Singapore (“MAS”) issued a consultation paper on group capital framework for a designated financial holding company (licensed insurer). The consultation closes on 15 December 2022.

The Financial Holding Companies Act 2013 (“FHC Act”) and its supporting regulations took effect on 30 June 2022. The supporting Notices relating to appointment of key persons, returns, investment activities and enterprise risk management, took effect on 1 July 2022.

MAS intends to issue a new Notice (“Group Capital Notice”) that applies to all designated financial holding companies that have a subsidiary that is a licensed insurer incorporated, formed or established in Singapore (“DFHC (Licensed Insurer)”).

Group capital requirements are not new regulatory requirements imposed on an existing DFHC (Licensed Insurer). Currently, a DFHC (Licensed Insurer) is already subject to group capital requirements which are imposed via Directions drawing from the powers of the FHC Act. Prior to the enactment of the FHC Act, these Directions were imposed via the MAS Act. The Group Capital Notice aims to set out the valuation and capital requirements for a DFHC (Licensed Insurer) in a transparent manner and based on the RBC 2 consolidation approach.

MAS aims to implement the Group Capital Notice by Q2 2023 (in time for Q2 2023 reporting). The consultation paper sets out the key proposals that will be encapsulated within the Group Capital Notice, which MAS is seeking feedback on.

Among others, MAS seeks views on the following matters:

  • Proposed group capital adequacy requirements;
  • Approach taken in recognising diversification benefits at the group level in calculating the group minimum capital adequacy ratio;
  • Approach taken in calculating the interest rate mismatch risk requirement for a FHC group;
  • Approach taken in assessing the impact of capital fungibility on the solvency for a FHC group;
  • Draft Group Capital Notice, in particular the calculation of adjustment for asset concentration risk (ACR) for a FHC group; and
  • Target implementation timeline for the new Group Capital Notice.

Reference materials

The following materials are available on the relevant webpage of the MAS website www.mas.gov.sg.