MAS increases oversight on reinsurance contracts

Insurers in Singapore are facing increased scrutiny from the Monetary Authority of Singapore (MAS), particularly in their dealings with reinsurance contracts, according to industry sources.

The financial regulator has requested that insurers submit the terms and conditions of their reinsurance agreements for review.

As per a report from The Straits Times, the MAS communicated its intentions during a conference hosted by the Singapore Actuarial Society, attended by 300 industry participants. The regulator emphasized that insurers engaging in reinsurance transactions may be subject to audits.

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 with alternative assets

The increased oversight from MAS 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 rising use of cross-border asset-intensive reinsurance.

The IAIS expressed concerns that investments in alternative assets could expose insurers to risks related to liquidity, valuation, hidden leverage, and credit.

The IAIS report also pointed to supervisory concerns in some markets over cross-border asset-intensive reinsurance, including potential conflicts of interest within corporate structures. The report warned of potential financial stability risks, such as concentration risks at the jurisdictional or reinsurer level, and the possibility of herd behavior among insurers.

Elsewhere, Bermuda’s financial regulator began investigating firms’ exposure to alternative assets in June. This probe followed issues with Miami-based private investment firm 777 Partners, which specializes in sports investments and operates the reinsurer 777 Re.

The Bermuda regulator’s inquiry is focused on the investment strategies of private equity-backed insurance groups that aim to match long-term liabilities, such as annuities, with illiquid private credit investments.

This regulatory action in Bermuda aligns with steps taken earlier this year by regulators in Utah and South Carolina, who reportedly forced five insurers in April to reduce their exposure to 777 Partners. The firm has acquired sports teams globally and was a previous bidder for the English Premier League football club Everton.

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