Singapore insurers come under closer MAS watch over reinsurance contracts

Insurers in Singapore will be more closely watched by the financial regulator, especially when it comes to reinsurance, or insurance for insurers.

Industry players here who sell their risks to reinsurers have been asked to submit the terms and conditions of their contracts to the Monetary Authority of Singapore (MAS).

MAS on Aug 26 told 300 participants of the Singapore Actuarial Society conference that it is monitoring and seeking details of insurers’ contracts with reinsurers.

Participants told The Straits Times that the regulator had made it clear that insurers who have such deals could be audited.

Typically, insurers buy reinsurance to recover some or all amounts paid out to claimants. In doing so, insurers ensure they are solvent.

Besides financing, other reasons for going into agreements with reinsurers include growing the insurance company’s capacity, stabilising underwriting results and spreading risk.

Market sources told ST that as long as the reinsurer is sound, this is not an issue, especially as the risk is not on the insurers’ books.

The closer monitoring comes in the wake of a report by the global standard-setting body, the International Association of Insurance Supervisors (IAIS).

The IAIS report in July highlighted that the increased allocation of capital to alternative assets, as well as the increased use of cross-border asset-intensive reinsurance are risks to the industry.

It noted that growing investments in alternative assets have the potential to increase exposure to risks related to liquidity, valuation, hidden leverage and credit, among other things.

The report said cross-border asset-intensive reinsurance raises supervisory concerns in some markets, such as conflicts of interest within corporate structures.

It added: “Potential financial stability risks could encompass jurisdictional and reinsurer-level concentration risks, as well as potential herd behaviour amongst insurers.”

In June, the financial regulator in Bermuda, which is the heart of global reinsurance, started to probe firms’ exposures.

The probe came after troubles in Miami private investment firm 777 Partners specialising in sports, and its reinsurer 777 Re.

Bermuda’s regulator is now looking at investment strategies of private equity-backed insurance groups that seek to match long-term liabilities such as annuities with illiquid investments in private credit sourced by their parent.

The Bermuda regulator’s move follows that of regulators in Utah and South Carolina, which reportedly in April forced five insurers to cut exposure to 777 Partners.

777 Partners has snapped up sports teams around the world and was previously bidding for English Premier League football club Everton.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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