ID 12/25 Response to Consultation Paper on Proposed Inclusion of Additional Criteria for Additional Tier 1 and Tier 2 Capital Instruments for Insurers
Executive Summary
This MAS circular (ID 12/25) announces the Response to Consultation Paper on adding new criteria for insurers' Additional Tier 1 (AT1) and Tier 2 capital instruments under the RBC 2 framework, finalizing enhancements to strengthen capital quality and loss absorption. It matters because it directly updates Notices 133 and FHC-N133, impacting how insurers recognize capital instruments from 1 January 2026, with a restriction to non-retail investors in Singapore, aligning Singapore's regime with global standards like IAIS ICS. #
What Changed
- - Additional Criteria for AT1 and Tier 2 Instruments: Introduces new eligibility criteria for capital instruments to qualify as AT1 or Tier 2 under RBC 2, enhancing loss absorption features (e.g., similar to full flexibility, non-default on non-payme
- Investor Restriction: Instruments must be sold only to persons who are not retail investors in Singapore to qualify, reducing retail exposure risk.
- Notice Amendments: Formalizes updates via ID 15/25, amending Notice 133 (for insurers) and Notice FHC-N133 (for Designated Financial Holding Companies), effective 1 January 2026. These align with global standards, e.g., IAIS ICS Tier 1/2 definitions
Suggested Considerations
- Review Existing/Planned Issuances: Inventory AT1/Tier 2 instruments against new criteria; ensure compliance with non-retail investor restriction (e.g., verify distribution channels and investor classifications).
- Update Capital Planning: Amend internal models and RBC 2 calculations per updated Notices 133/FHC-N133; test eligibility of instruments for loss absorption (e.g., callability, maturity ≥5 years for Tier 2).
- Investor Documentation: Implement controls to confirm sales exclude Singapore retail investors; update prospectuses and distribution agreements.
- Reporting & Disclosure: Integrate changes into valuation/capital reporting under RBC 2; seek MAS approval if needed for non-standard instruments.
- Training & Governance: Train compliance/treasury teams; board oversight for capital planning impacts.
Compliance Impact
Urgency: High – Effective 1 January 2026 (less than 1 month from today, 6 Feb 2026), requiring immediate review of issuances to avoid disqualification of capital, potential RBC shortfalls, or supervisory action. Matters for capital adequacy amid RBC 2 enhancements, as non-compliant instruments reduce eligible capital, increasing solvency risk; aligns with IAIS but adds local retail protection.
Who is Affected
References
AI-generated analysis. May contain errors or omissions — verify with the original MAS source before acting. Full disclaimer.
Summary
Informs insurers on the issuance of the Response to Consultation Paper on Proposed Inclusion of Additional Criteria for Additional Tier 1 and Tier 2 Capital Instruments for Insurers.