Moody's: MAS measures against erring insurers to boost client confidence

The overall business impact would be temporary because no further penalties were handed out.

Singapore’s recent regulatory actions against several insurers will help strengthen policyholders’ confidence even if it can affect the insurers’ brands, according to a Moody’s Investors Service report. 

On 15 June 2021, the Monetary Authority of Singapore (MAS) reprimanded four financial Institutions, namely AIA Financial Advisers, Prudential Assurance Singapore, Aviva, and Aviva Financial Advisers, for breaching regulatory requirements on remuneration of supervisors and risk management arrangements. The last two are subsidiaries of Aviva Singlife.

MAS also admonished a consultant engaged by Aviva for accepting remuneration in breach of regulatory requirements. Aviva FA CEO Lionel Chee was also rebuked for failing to discharge the duties of his office.

This is credit negative to the insurers because it could damage their image and temporarily affect their sales activities in Singapore, the report said. In particular, Aviva could suffer the most damage because it mainly operates in the city-state and its financial advisory channel comprised the most of its first-year premium income in 2020.

Aviva FA is also a key insurance distribution channel in Singapore, accounting for 26.7% of the industry's new business sales by weighted premiums, Moody’s said.

On the other hand, the overall business impact would be temporary because no further penalties were handed out to the insurers, the report noted.

“In addition, most of these breaches are related to past sales activities and the reprimanded insurers have been working on remediation measures to prevent future breaches.”

Moreover, the reprimand shows that MAS has a close eye on the insurance industry to promote good sales conduct and align incentives of financial advisers with policyholders' interests. This will boost confidence in the sector and financial advisory channels.

This also reflects Singapore's more advanced regime regarding regulations of financial advisers and fair customer treatment compared with other Asian markets. The credit significance of this differentiation will rise as the insurance industry, like many other industries, will increasingly be exposed to environmental, social and governance (ESG) risks, the report concluded.