Review of the Capital Adequacy Framework in Singapore

Wai Yi Lee

In this chapter, we will look at how another jurisdiction outside of the European Economic Area (EEA), Singapore, reviews its capital adequacy framework. This will help provide another perspective to the Solvency II framework that we are familiar with.


The risk-based capital (RBC) framework for insurers was first introduced in Singapore in 2004. It adopted a risk-focused approach to assessing capital adequacy and sought to reflect the relevant risks that insurers faced. The minimum capital prescribed under the framework served as a buffer to absorb losses. The RBC framework also provided clearer information on the financial strength of insurers, and facilitated early and effective intervention by the Monetary Authority of Singapore (MAS), if necessary.

Prior to the introduction of RBC, the framework was similar to the existing Solvency I, where valuation relied on undisclosed margins and approximations, and the solvency margin was non-risk-based (see Figure 3.1). This framework was not sufficiently transparent or risk-focused to reflect adequately the true financial conditions of insurers as the financial services sector became increasingly

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