Singapore life insurers to lower caps on policy illustrations

The upper illustration rate will be capped at 4.25% p.a. and the lower rate at 3% p.a.

The Life Insurance Association, Singapore (LIA) has announced that the sector will reduce the caps of illustrative investment returns used in policy illustrations (PI) for Singapore-dollar denominated participating (Par) policies, effective 1 July 2021.

Life insurers are now expected to draw at least two scenarios, namely an upper investment return scenario and a lower investment return scenario to allow for a reasonable potential range of the level of benefits. 

The upper illustration rate will be capped at 4.25% per annum and the lower illustration rate will be capped at 3% p.a., with the latter must be at least 1.25% p.a. below the upper illustration rate. 

In addition, illustration rates should not be higher than the insurer’s view of the investment returns achievable over the lifetime of Par policies. The upper illustration rate should also not exceed the 4.25% p.a. cap.

These rates are for illustrative purposes only and will not affect actual returns of existing and future Par policies, assured LIA president Khor Hock Seng. The rates also do not represent the upper and lower limits of the investment performance of an insurer’s Par fund.