MAS publishes consultation paper on proposed equity counter-cyclical adjustment and inclusion of additional criteria for Additional Tier 1 and Tier 2 capital instruments for insurers

29 April 2025

On 27 March 2025, the Monetary Authority of Singapore (“MAS”) issued its Consultation Paper on Proposed Equity Counter-Cyclical Adjustment and Inclusion of Additional Criteria for Additional Tier 1 and Tier 2 Capital Instruments for Insurers (“Consultation Paper”).

MAS is looking to finetune the enhanced risk-based capital framework (“RBC 2 framework”) for insurers in Singapore, which has been implemented with effect from 31 March 2020. Such further enhancements will take into account, among other things, global regulatory changes and market developments. MAS will continue to consult and engage the industry and public on the ongoing finetuning of the RBC 2 framework.

CCA for equity investment risk requirement

MAS proposes to introduce a counter-cyclical adjustment (“CCA”) for the equity investment risk requirement, which is intended to reduce procyclicality arising from significant equity market movements. The Consultation Paper covers the following areas:

  • indices to calibrate the CCA;
  • thresholds for exuberant and stress equity events;
  • applicability of the CCA;
  • proposed equity stress factor when triggered; and
  • grading mechanism.

Additional criteria for Additional Tier 1 and Tier 2 capital instruments

MAS also proposes to include additional criteria for Additional Tier 1 and Tier 2 capital instruments under the RBC 2 framework. The first criteria pertains to the proposed amendments to Notice 133 on Valuation and Capital Framework for Insurers and Notice FHC-N133 on Valuation and Capital Framework for Designated Financial Holding Companies (Licensed Insurer) (DFHC(Licensed Insurer)) to revise the minimum requirements for Additional Tier 1 and Tier 2 capital relating to the types of investors they are issued to, with an intended effective date of 1 January 2026. The second criteria pertains to the introduction of provisions to ensure loss absorbency at the point of non-viability.

Reference materials

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