ID 10/25 Response to Consultation Paper on Proposed Equity Counter-Cyclical Adjustment for Insurers

What Changed

Mandatory CCA Implementation MAS will proceed with introducing the CCA as a mandatory requirement across all insurers. This eliminates discretionary application and prevents selective opt-in/opt-out behavior during market cycles. The framework incorporates an upward adjustment of +5% during periods of market exuberance. Methodology Refinement Following industry feedback, MAS modified the calculation methodology from daily year-on-year (YoY) returns to monthly average YoY returns. The calculation process involves: - Determining YoY returns on a daily basis - Computing the average YoY returns over the preceding one-month period This change addresses concerns that daily calculations created excessive sensitivity to timing and duration of market stress events. Scope of Application The CC

What You Need To Do

• *Immediate Compliance Steps (by January 1, 2026)
• *System Implementation – Develop or modify capital calculation systems to incorporate monthly average YoY equity return calculations
• *Data Infrastructure – Establish daily equity return tracking mechanisms and monthly aggregation processes
• *Policy Documentation – Update internal capital management policies to reflect mandatory CCA application
• *Governance Alignment – Ensure board and senior management understand the mandatory nature and cannot exercise discretion to opt out during market stress
• *Testing & Validation – Conduct parallel runs comparing current equity capital charges with CCA-adjusted charges to quantify impact

Key Dates

Who is Affected