Ong Chong Tee: Confidence in and resilience of the life insurance industry Speech by Mr Ong Chong Tee, Deputy Managing Director (Financial Supervision) of the Monetary Authority of Singapore, at the Life Insurance Association (LIA) Annual Luncheon 2015, Singapore, 4 March 2015. *  *  *  Dr Khoo Kah Siang, President of the Life Insurance Association, Distinguished guests, Ladies and Gentlemen. 1. Thank you for inviting my colleagues and I to the Association’s 13th Annual Luncheon. 2. Modern life insurance is said to have its beginnings in London more than 300 years ago by a company called Amicable Society for a Perpetual Assurance, with the aim of allowing an amicable distribution of contributions to be made by deceased members to their surviving wives and children. But even during the times of Ancient Rome, it is believed that some forms of life insurance existed to help mitigate the costs of burials of deceased members and to provide for their surviving families. While clearly much has changed in the industry, the central tenet of the industry has remained – to provide financial protection to dependants and in current times, also as a means of savings and wealth management. 3. A life insurance purchase is in essence a legal promise. In exchange for payment of premiums, an insurer will honour claims and make payment as agreed under the insurance policy. Hence given the typically long term nature of the commitments, confidence in and resilience of the life insurance industry must underscore its growth and development.
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.