Time for Change

A closer look at general and country-specific regulatory trends in Asia Rob Curtis

As insurance markets continue to develop globally, many Asian regulators are reviewing their current approaches to the supervision of insurers and insurance intermediaries. In several countries, changes in market characteristics—in particular, higher income per capita and technological uptake—have led to rapidly increasing consumer demand and insurance penetration, and have in turn driven regulatory change. In addition, historical solvency issues across Asia, coupled with changes in other regions, such as the recent implementation of Solvency II in Europe and the ongoing implementation of the global Insurance Core Principles (ICPs) of the International Association of Insurance Supervisors (IAIS) by insurance supervisors, have increased the pressure to modernize insurance capital regulation in the region. Hong Kong is the latest jurisdiction to reform capital requirements by working on the introduction of a risk-based capital regime supported by a new Own Risk and Solvency Assessment (ORSA) requirement. These evolving market needs and global regulatory drivers have accelerated the pace of existing reforms in many countries and have inspired other regulators to begin their own regime changes.

Several areas of regulatory change have emerged as areas of common focus. In particular, solvency and risk management reforms are at the center of most changes, with many mature insurance markets having already considered or implemented increasingly complex and nuanced frameworks, along with more extensive reporting and disclosure requirements. The supervision of insurance groups and treatment of consumers are other areas of focus, largely as a result of systemic issues in specific local insurance markets. Major reforms are planned in many countries over the next three to five years, and these broad regulatory changes present a variety of new challenges to firms operating in Asia and may continue to do so if other countries in the region adopt them. The reforms will require many insurers to reconsider their risk and capital management strategies, corporate structures, and approach to ensuring consumer protection and embedding a good corporate culture. We summarize the key developments and set out country-specific changes in the rest of this article.

Capital and Solvency

Perhaps the most significant change in Asian economies is the shift toward more advanced forms of capital and solvency regulation. Some insurance markets are now adopting risk-based capital (RBC) frameworks, which borrow significantly from the European Solvency II standard. South Korea, for example, plans to completely replace its regime in the coming years, requiring a capital injection of 50 trillion won (about 40 billion USD) into its life insurance industry. Additionally, Japan is conducting extensive fieldwork to evaluate the impact of an economic value-based solvency regime. Furthermore, Hong Kong is also significantly changing its current rule-based solvency regulations, moving toward a three-pillar approach similar to Solvency II and other developed markets.

Other jurisdictions continue to refine their existing RBC frameworks to better account for stakeholder needs. For example, monetary authorities in Singapore and Thailand have both engaged in extensive industry and expert consultations, and are considering changes that propose to improve their regimes’ risk confidence, coverage and sensitivity. Although other Asian countries have not made explicit plans to fully reform or make major improvements to their capital frameworks, it is clear they are keeping a close eye on developments in these larger, more mature markets.


ORSA requirements are also gaining traction in the Asian insurance sector, largely as a result of its inclusion in the IAIS ICPs. Recent regulations in several countries, including Japan, Singapore, Taiwan and Thailand, require annual submission of ORSA reports to the regulator. Others, such as Hong Kong, have plans to introduce similar schemes in coming years.

Supervision of Groups

The approach to the supervision of large insurance groups is also receiving more attention in recent years. In many countries, including India and Indonesia, governments have altered foreign ownership restrictions in order to prevent local insurance industries from being overly affected by foreign-owned groups. Other economies, such as Hong Kong and Singapore, do not have these type of restrictions and have instead opted to regulate large groups separately. For example, Hong Kong recently introduced a recovery regime affecting global systemically important insurers (G-SIIs), which will establish two tribunals for the purpose of administering, mediating and reviewing recovery of these insurance conglomerates.

Consumer Treatment

Asian regulators also place an increased focus on insurers’ conduct and treatment of consumers. Several countries have identified systemic issues within their insurance markets—largely due to lack of information and inappropriate outcomes for consumers, or lack of insurance availability and penetration—and are tackling this with tougher requirements targeted at both insurers and intermediaries. Hong Kong, Japan and Malaysia have recently enhanced regulations around product design, appropriateness of product for consumers, remuneration and commission structures, marketing and sales, while South Korea has announced a roadmap to strengthen regulations to achieve similar objectives. Singapore has taken a different track, focusing on the culture, corporate values, remuneration and accountability of senior management and its potential to effect change in consumer outcomes. Japan, Macau and Singapore have strengthened regulation of licensing and professional development of intermediaries and financial advisers in an attempt to ensure informed and appropriate treatment of consumers.

The likely effects on insurers from all of these changes are significant and involve:

  • A continued move toward economic valuation basis and economic capital model builds
  • Higher solvency control level requirements
  • Increased need to improve enterprise risk management (ERM) standards and group ERM functions and capabilities
  • Better data and systems requirements aligned to International Financial Reporting Standard (IFRS) 17
  • Increased pressure on the conduct agenda and impact on internal approach, skills and resourcing
  • Need to respond to jurisdiction-specific requirements, such as Hong Kong proposing to conduct risk analysis within the ORSA

See Figure 1 for a summary of country-specific changes. Simply click on the name of each country or territory to reveal its regulations.

Figure 1: Regulatory Changes by Country/Territory


It is clear that regulatory change in Asia is occurring quickly, with supervisors applying enhanced levels of supervision across all pillars, particularly in their pursuit to employ more risk-based techniques to accompany their off-site and on-site supervisory programs. Greater focus and accountability on boards and among senior management relating to the quality of their governance and risk assessment arrangements, particularly off-balance sheet and noninsurance exposures, will be at the heart of these new reviews. Similarly, we can expect to see a much greater emphasis placed on groupwide supervision and systemic risk analysis across Asia, combined with an increasing focus on conduct of business requirements. For many insurers, such changes will pose structural, data and resourcing challenges for many years to come. For most, now is just the beginning.

Rob Curtis is the Global Insurance Regulatory & ASPAC Risk lead at KPMG, and is co-located in Sydney and Hong Kong.