Singaporean insurers worry about new regulations

New rules on solvency and market rank first in insurers' major concern, according to a survey by Centre for the Study of Financial Innovation and PwC.

The greatest risk facing the insurance industry is the raft of new regulations being introduced simultaneously at international and local levels, according to a new survey which ranks insurance sector risk.

The CSFI’s latest Insurance Banana Skins survey, conducted in association with PwC, says that new rules governing issues such as solvency and market conduct could swamp the industry with costs and compliance problems. It could also distract management from the more urgent task of running profitable businesses at a time when the industry is already under stress.

The survey polled nearly 500 insurance practitioners and industry observers in 40 countries to find out where they saw the greatest risks over the next 2 Regulatory risk emerged a clear leader in all major markets, including Singapore.

The wave of regulatory changes expected also tops insurer’s list of top concerns in Singapore.

"Governments globally are shifting their regulatory emphasis to address the fundamentals of solvency, governance and enterprise risk management, and focusing on the issues that could be brought on by systemic risks,” says Dominic Nixon, Asia Pacific Financial Services Leader, PwC LLP.

He notes: “Insurers in Singapore are beginning to feel the impact of the EU’s Solvency II Directive, which is due for implementation in Europe by the end of this year. Insurers based in Singapore and in fact in Asia, are stepping up on awareness and developing skill sets that will help them address the changes required under the Solvency II framework.”

But Solvency II is just one of the regulatory concerns impacting Asia. Insurers are also concerned about the fast track changes expected in international reporting standards that could be adopted locally. 

“A number of changes in international reporting standards are expected and they will be released in stages and adopted locally by the different markets at different times within these two years. The uncertainty on scale, expectations and timeline is a challenge, especially since core systems within most of these financial institutions could be affected to meet the requirements,” adds Dominic Nixon. 

Tax is impacted too. Dominic Nixon, says, “As corporate tax filing in Singapore is currently based on both audited accounts and regulatory returns, both regulatory changes and accounting changes will have an impact on the
taxation of insurers. Tax laws and tax practices must be able to evolve and keep pace with regulatory and accounting changes.”

Other high-ranking concerns revealed by the survey include the availability of capital to meet tougher regulatory requirements, and the uncertain state of the world economy and financial markets. These are adding to the pressures on an industry which is being squeezed by low interest rates and intense competition.