This is again to be expected as one of the main objectives of the RBC2 review is to improve risk sensitivity of the capital framework so as to more accurately reflect the different risk profiles of insurers. 25. MAS will continue to review and study the QIS results and take on board many of your feedback and suggestions. 26. As examples, we are going through comments from some industry participants relating to widening the eligibility criteria for the matching adjustment feature of RBC2, the possibility of giving some credit to the illiquid nature of some other liabilities that do not qualify for the matching adjustment, the calibration of risk charges for equities and long-dated corporate bonds, and the calibration of the operational risk charge, which has also been discussed with the industry. 27. Let me emphasize that we will implement RBC2 only after we have done a thorough calibration and assessment. We want the new capital framework to be more risk-sensitive and robust, but it should also be fit-for-purpose and not hamper well managed insurance businesses unduly. At individual firm level, the new framework does not seek to make it  BIS central bankers’ speeches  3  better or worse for you compared to the current RBC, but only that how much capital that you will hold in future be more sensitive to your risk profile. 28. The MAS will embark on another stage of consultation and we are also targeting an additional QIS in Q2 2015.
All direct life and composite insurers had participated in QIS1. I would like to thank the LIA and its members for the active participation and feedback. Indeed, many of you have expressed understanding and support for many of the proposed enhancements in the RBC2 framework. 21. Let me share a couple of high level observations from the QIS1 results with you. 22. First, there is an increase in risk requirements compared to the existing RBC framework. This is to be expected, given the more comprehensive risk coverage and higher target confidence level under RBC2. RBC2 targets a 99.5% confidence level over a one-year period, which is increasingly seen as the benchmark for insurers globally. From the results that I have seen, most of our insurers are able to maintain capital adequacy ratio or CAR of well above 100% under the preliminary set of RBC2 proposals. 23. Some industry players are naturally anxious if they will still have to maintain the same high buffers of way above 100% CAR or FSR under RBC2, as they do currently for RBC. This is not our expectation, given that the risk requirements under RBC2 are designed to be more risk sensitive, comprehensive and calibrated to a higher target confidence level. 24. A second observation is the greater differentiation in CAR between firms with different risk profiles.