Insurers face audits due to IAIS issues.
According to industry insiders, the Monetary Authority of Singapore (MAS) is increasing its inspection of Singapore insurers, particularly those engaging with reinsurance contracts.
The banking regulator has asked insurers to submit the terms and conditions of their reinsurance arrangements for assessment.
According to The Straits Times, the MAS announced its intentions at a meeting held by the Singapore Actuarial Society, which was attended by 300 industry professionals. The regulator emphasised that insurers that engage in reinsurance transactions may be audited.
Reinsurance helps insurance companies expand their capacity, stabilize underwriting results, and spread risk. Market sources noted that these practices typically do not pose a problem as long as the reinsurers involved are financially sound.
Growing risks associated with alternative assets
The MAS’s increased oversight follows a July report by the International Association of Insurance Supervisors (IAIS), which highlighted risks associated with the insurance industry’s growing allocation of capital to alternative assets and the increasing use of cross-border asset-intensive reinsurance.
The IAIS voiced worry that investments in alternative assets may expose insurers to risks relating to liquidity, valuation, hidden leverage, and credit.
The IAIS research also raised supervisory concerns in various markets over cross-border asset-intensive reinsurance, citing potential conflicts of interest within company structures. The paper warned of potential financial stability issues, such as jurisdictional or reinsurer concentration risks, as well as insurer herd behaviour.
Bermuda’s banking regulator began scrutinising firms’ exposure to alternative assets in June. This investigation sprang from concerns about Miami-based private investment firm 777 Partners, which specialises in sports ventures and operates the reinsurer 777 Re.
The Bermuda regulator’s investigation focusses on the investment strategies of private equity-backed insurance organisations that seek to combine long-term commitments, such as annuities, with illiquid private credit assets.
Bermuda’s regulatory move is consistent with steps made earlier this year by authorities in Utah and South Carolina, which reportedly required five insurers to cut their exposure to 777 Partners in April. The company has acquired sports teams all around the world and was a prior bidder for the English Premier League football club Everton.
What are your opinions about this story? Please feel free to leave your comments below.
