Risk-based Capital (RBC) and strengthened requirements on risk management and/or corporate governance are continuing trends in the Asia Pacific, says Aon Benfield, a leading global reinsurance intermediary and full-service capital advisor.
Aon Benfield points out these trends as it released yesterday its Asia Pacific Solvency Regulation report for 2017, outlining the latest non-life solvency requirements for 21 selected markets in the region. There are differences among the markets which are each in different developmental stages.
The 21 Asia Pacific markets are: Australia, Hong Kong, Japan, Malaysia, New Zealand, the Philippines, Taiwan, China, Brunei, India, South Korea, Myanmar, Pakistan, Singapore, Indonesia, Macau, Nepal, Papua New Guinea, Sri Lanka, Vietnam and Thailand.
Key trends highlighted in the report include:
a)Risk-based Capital (RBC) trends continue:
Three years after issuing the RBC consultation paper, Hong Kong started the first round of Quantitative Impact Study (QIS) in 2017 and the second round of QIS is expected to start in mid-2018. In China, after successfully implementing C-ROSS in 2016, the regulator recently announced the C-ROSS Phase 2 project, aiming to enhance supervision rules, complete the execution mechanism, and strengthen supervision collaboration. In the Philippines, the regulator announced that its RBC 2 took effect for non-life insurers and reinsurers. In India, the regulator has formed an RBC steering committee and aims to implement RBC by 2021.
b)Strengthened requirement on risk management and/or corporate governance:
In Japan, the regulator released result of ERM assessment based on ORSA reports and ERM hearings. In China, after successfully implementing C-ROSS Pillar 1, the regulator paid more attention to Pillar 2. In particular, the Solvency Aligned Risk Management Requirements and Assessment (SARMRA) annual review has been conducted. Regulators have also introduced enhanced guidance on corporate governance, such as “the Guideline on The Corporate Governance of Authorized Insurers” (GL10) in Hong Kong and “Notice on Corporate Governance for Insurance Companies and Takaful Operators” in Brunei.
c)Enhanced catastrophe reporting:
Hong Kong RBC will include catastrophe risk charge, although it is not included in the first round of QIS. Regulators in Singapore and Thailand are considering adding catastrophe risk into solvency capital calculation as part of their RBC 2 initiatives. In Philippines, the RBC 2 that took effect this year includes catastrophe risk charge, and the calibration level will progressively increase to 1 in 200 years by 2019. These regulatory changes help motivate insurers to pay more attention to their management of catastrophe risk.