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Regulatory Perspective

to move towards an RBC regime (Figure was first introduced in Singapore in from previous consultations and QIS,
4). The IA began discussions with the 2004 and is also a risk-focused approach the third consultation paper includes
industry on the RBC framework in 2013. to assessing capital adequacy (Figure 6). revised proposals and other detailed
The first consultation was conducted The key objectives include enhancing technical specifications for insurers
from September to December 2014 to policyholder protection, observing to conduct the second full scope of the
solicit the industry’s views on the pro- international standards/ best practices, QIS planned during October 2016. Key
posed RBC framework. A quantitative and testing whether the insurer can revisions include:
Impact Study (QIS) is expected to begin fulfil its obligations on a sustainable • Recalibration of certain risk require-
in late 2016 or early 2017.
HbKasRBisaB.seCd toinmtheelinfeeedback received ments for equity investments, credit
The International Monetary Fund
(IMF) welcomed Hong Kong’s initiative Figure 4: Proposed Hong Kong RBC implementation
of moving towards an RBC regime in
its 2014 report of the Financial Sector Phase I (2013-2015) Phase II (2015-2017) Phase III (2-3 years) Phase IV
Assessment Program (FSAP). The IMF
also suggested the IA (a) establishes HKRBC BSâ–º Developmentof theframework& â–º Amendment of legislation â–º Implementation phase
solvency margin requirements for all key approaches â–º Complete all the preparatory â–º Rolled out in phases with a
classes of long term business, (b) pro- â–º Consultation
vides supervisory guidance on insurers’ ► Development of detailed rules tasks including public sufficiently long run-in period
obligations to meet policyholders’ rea- ► Quantitative impact study consultations
sonable expectation and (c) enhances â–º Another consultation
the current dynamic solvency tests.
The IA aims to establish a clear and Figure 5: Proposed HK RBC balance sheet Free surplus
consistent valuation standard (includ- Prescribed capital
ing explicit best estimates of technical Page 6 requirement (PCR)
provisions and risk margins) and risk- Minimum capital
sensitive capital requirements, together requirement (MCR)
with the enhancement of corporate gov-
ernance, enterprise risk management Asset Margin over the
(ERM) and public disclosure. current estimate
SG timeline
The IA has proposed that the valu- (MOCE)
ation of assets and liabilities for the Current estimate
capital requirement calculation (Figure
5) be undertaken on an internally con- (CE)
sistent basis with the general purpose Other liabilities
financial statements based on Hong
Kong Financial Reporting Standards
(HKFRS) or International Financial
Reporting Standards (IFRS). Under the
current HKFRS, different accounting
policies are adopted for the liability
valuation. The assets, however, are val-
ued according to the asset classification
and company’s accounting policy. It is
expected that IFRS 4 Phase II and IFRS
9 may serve as the common bases for
the technical provisions quantification
and the asset valuation for the solvency
calculation.

Singapore FPigaugree 67: Proposed Singapore RBC implementation
On 15 July 2016, the Monetary Authority
of Singapore (MAS) issued its third 2004: 1st introduction of RBC to Mar 2014: 2nd consultation Jul 2016: 3rd consultation 2017-2018: Potential QIS 3
public consultation paper on its review Singapore
of the RBC framework for insurers (RBC2
Review). It sets out the revised proposals 2004 2012 2014 2016 2017-2018 to be
after taking into account the feedback determined
received from the previous consultation
in 2014 and subsequent discussions Jun 2012: 1st consultation for Jun 2014: QIS 1 Oct 2016: QIS 2 Expected implementation
with the industry. The RBC framework RBC2

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