In October last year, the Monetary Authority of Singapore (“MAS“) issued a Consultation Paper on its proposed framework for Domestic Systemically Important Insurers (“D-SIIs“) which is intended to formalise and update its Framework for Impact and Risk Assessment of Financial Institutions to facilitate the annual impact assessment of insurers based on their size, interconnectedness, substitutability and complexity.
On 21 September 2023, MAS issued its Response to feedback received on the Consultation Paper, and announced that it will be implementing the D-SII framework as proposed on 1 January 2024. Under the D-SII framework, MAS will formally designate insurers whose failures are assessed to have a significant impact on the financial system and broader economy in Singapore as D-SIIs. Four insurers are included in the inaugural list of D-SIIs: AIA Singapore Private Limited; Income Insurance Limited; Prudential Assurance Company Singapore (Pte) Limited; and The Great Eastern Life Assurance Company Limited.
In the Consultation Paper, MAS sought views on its proposal to assess all insurers licensed under the Insurance Act 1966 under the D-SII framework. Several respondents suggested that reinsurers and small insurers should be excluded from the assessment. However, MAS commented that reinsurers should not be ex-ante excluded as their failure could still have significant impacts on the financial market. The systemic importance of insurers is also not just based on the size of their businesses. All insurers should therefore at least go through a Stage One assessment (see discussion below on the two-stage assessment process) in which MAS preliminarily selects insurers that cross the threshold of any impact indicator based on Size, Interconnectedness, and Substitutability before any recommendation of D-SII status is put forth to MAS’ senior management for detailed consideration under Stage Two of the assessment.
MAS sought views on the four proposed indicators for assessing an insurer’s systemic importance, namely: Size, Interconnectedness, Substitutability and Complexity. In its Response, MAS made several noteworthy points.
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