Insight & Analysis

Press release: Deloitte: market updates on insurance solvency capital developments

Published: Feb 2022

22nd February 2022 – Deloitte are pleased to announce the launch of our latest report, Weather the storm: Market updates on insurance solvency capital developments.

Newspaper press release

Driven by the aspiration to align with international capital standards to strengthen the financial soundness and resilience of the insurance sector, several regional markets, such as Australia, Mainland China, and Singapore, have been making the transition to a new solvency regime akin to Solvency II.

For their part, other markets, such as Hong Kong SAR, Japan, Korea, Malaysia, New Zealand, and Thailand are also embarking on their journey to a new solvency regime.

Despite the different levels of progress, these regulatory changes all have a far-reaching impact on the level of capital held by the insurance sector, and is a topic of focus for a myriad of stakeholders, including regulators, investors, credit rating agencies and the general public.

In this report, we provide an update on the solvency regime developments in each market, and our observations on the market trends under formation.

Key highlights

Several key themes can be observed in the evolution of solvency regimes across the Asia Pacific region:

More volatile solvency results

The new solvency standards being adopted will produce more volatile solvency results relative to existing regimes, given the economic balance sheet approach.

Need to be “business ready”

The increased level of solvency volatility implies that insurers will need to be “business-ready” for the new regimes, by fully embedding solvency-related metrics in all business processes and having the ability to react to the key underlying drivers of solvency to enable timely business decision-making.

Top-down management support required

To be “business-ready”, the operationalisation of new regimes will require top-down management support to drive enterprise-wide business embedding and applications.

Southeast Asia highlights

The different levels of progress in the evolution of solvency regimes in Southeast Asia can be broadly divided into two categories:

  1. Markets on a new solvency regime
    • Singapore: Adopted a new solvency regime in 2020
  2. Markets transforming to a new solvency regime
    • Brunei: Currently conducting a field testing of the new risk-based capital (RBC) framework; the framework is expected to be finalised once the regulator has considered the field testing outcome
    • Malaysia and Thailand: Going through a major change in the solvency regime developed based on the Insurance Capital Standard (ICS) in consideration of developments under IFRS 17
    • Philippines: Introduced the RBC framework to the insurance sector in 2020

Download the report

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