Singapore’s Regulator: Regional and Group-Wide Supervision Needed for Companies

Insurance regulators need to work on closer supervision of the regional and group-wide activities of insurance companies that are more active in overseas markets across the region, according to Boon Ngiap Lee, assistant managing director of Monetary Authority of Singapore.

"The global financial crisis has highlighted the importance of surveillance of risks beyond the level of individual firm, sector or country," said Lee, at the recent ASEAN Insurance Regulators Meeting in Singapore. The Association of Southeast Asian Nations is an economic organization of 10 Southeast Asian countries, including Singapore, Indonesia, the Philippines, Malaysia, Thailand, Brunei, Myanmar, Cambodia, Laos and Vietnam.

With the increasing connection of ASEAN financial markets, Lee said "the need to develop effective macroprudential surveillance techniques for the region becomes more pressing."

Lee said it's crucial for "regulators to respond by establishing a comprehensive framework to address group-wide activities and risks." Supervisory cooperation needs to go beyond the traditional cross-border exchange of information.

Regulators have to agree on and designate a group-wide supervisor to take responsibility for consolidated supervision of the group, under the revised International Association of Insurance Supervisors core principles. The AIRM platform provides "a strong foundation" to develop additional supervisory arrangements among ASEAN regulators, according to Lee.

ASEAN's insurance markets recorded 22% growth in 2010, but insurance penetration is low at under 3% -- less than half the global penetration of 7%. "There is clearly an expanding market for insurance products in the region, which will provide good growth opportunities for ASEAN insurers," said Lee.

Lee said ASEAN's insurance industry could form a multisector work group to come up with guidelines and best practices to advance reinsurance contract certainty, given the growing volume of cross-border regional reinsurance business.

In Singapore, the work group is made up of the Singapore Reinsurance Association, the General Insurance Association, Reinsurance Brokers Association, Lloyd's and Insurance Law Association of Singapore. Lee said "MAS supports this initiative and will work with the industry to implement new standards."

Some of the private-public partnership initiatives in regulatory development "may be more appropriate at the national level, while others could be extended to regional level," said Lee. In enhancing self-regulation and improving risk management practices, he noted there is also scope for market players to take the lead with support from regulators.

Lee said the ASEAN insurance market appears to be promising but "we will not be insulated from economic and financial developments in the United States and Europe." Insurance regulators and the industry have to work closely together in this uncertain environment. "Insurers must brace themselves for a more difficult risk and investment environment," he noted.

(By Iris Lai, Hong Kong bureau manager: [email protected])