MAS flags risks in insurers’ private asset allocations and AIR

Allocations may include investments in private equity and credit.

The Monetary Authority of Singapore (MAS) is monitoring insurers’ growing allocation to private assets following recent market disruptions that highlighted vulnerabilities, including liquidity and valuation risks.

“This could be through direct investments in private equity or credit, or indirectly through asset-intensive reinsurance, or AIR,” said  MAS assistant managing director Marcus Lim at the Life Insurance Association Annual Luncheon on 30 March.

He said AIR allows insurers to transfer risk and optimise balance sheets whilst tapping specialised investment capabilities in private markets to support policies with significant investment risk.

However, risks may still arise in collateral quality, market liquidity, and insurers’ ability to meet recapture obligations under stress.

“Insurers must therefore exercise strong risk management, apply robust stress testing, and ensure that the search for yield never compromises the fundamental promise of policyholder protection,” Lim added.

MAS aims to consult on further guidance in this area later this year.

Lim said the authority is also consulting on new guidelines covering third-party risk management and operational risk management, with the consultation closing on 20 April.

Incidents last year demonstrated that vendors can be a weak link in efforts to maintain trust with policyholders, he added.