None

1
Enhancing Insurance Regulation and Supervision
David Richardson Director Asia Actuarial
Services PricewaterhouseCoopers 8th September
2008
PwC
connectedthinking
2
HISTORICAL BACKGROUND
PwC
connectedthinking
3
HISTORICAL BACKGROUND

• Insurance legislation designed to try to ensure
  solvency through implicit margins and
  conservative assumptions
• Assets at lesser of book or market value
• In Singapore/Malaysia, property taken into
  account at a value 30 years ago
• This was thought safe the safer the better
• Taxation authorities didnt help since a property
  revaluation would lead to a tax bill
• For life companies, this was coupled with a
  statutory net premium valuation of liabilities
• Net premium valuation involves calculating
  premiums based on prescribed mortality, morbidity
  and discount basis and then subtracting the
  present value of future net premiums from
  the present value of the sum assured and
  attaching bonus, if any, on the prescribed basis

4
HISTORICAL BACKGROUND

• No explicit account is taken of management
  expenses, surrenders, lapses or distribution
  expenses. No explicit account is taken of
  expected future bonuses paid to policyholders
  or expected future dividends to be paid to
  shareholders
• The prescribed discount rates were what were
  thought to be low interest rates at the
  time so as to be safe and implicitly provide for
  future reversionary and terminal bonuses.
• The prescribed mortality rates were deliberately
  historical so as to implicitly provide margins
• The prescribed net premium valuation basis for
  Thailand requires the use of a discount
  rate equal to the interest rate used in the
  pricing of the life insurance products subject to
  a maximum of 6 p.a. The prescribed mortality
  table is TMO 86 for policies issued before
  2002 and TMO 97 for policies issued from and
  after 2002.

5
HISTORICAL BACKGROUND

• Current mortality experience among a number of
  life insurers is about 50 of TMO 97
• A Zillmer adjustment of 5.5 is permitted for
  ordinary life business and 6.5 for
  industrial life business
• The defects are huge lack of transparency and an
  inability of the insuring public to compare
  the financial health of one company with another
• Capital was locked away inefficiently and
  unrealised investment gains were passed to
  neither policyholder nor shareholder
• Without unrealised investment gains in the
  accounts, insurance was more expensive than it
  should have been and insurance company products
  were looking increasingly uncompetitive relative
  to banking and unit trust products

6
h
HISTORICAL BACKGROUND

• The discount rate for the net premium valuation
  was fixed in times of high interest rates and
  could not cope with an economic cycle of low
  interest rates and what was thought to be
  conservative was nothing of the kind
• The same interest rate was prescribed for valuing
  participating policies as well as
  non-participating products illogical
• One size fits all net premium valuation ignored
  any differences in rates of future bonuses or in
  the difference in management expenses, lapses,
  investment returns etc between different
  companies
• Even a mortality margin for life insurance
  valuations didnt help the proper emergence of
  reversionary bonus because the margin which is
  based on the difference between sum assured and
  reserve decreased with policy duration whereas
  reversionary bonus values increase with duration
• Certain risks such as asset/liability mismatching
  risk and borrower default risk were not
  recognised at all and no reserves established to
  reflect these risks

7
HISTORICAL BACKGROUND

• Governments were becoming increasingly concerned
  the demise of Equitable Life in the UK and HIH
  in Australia
• Basel 2 provided an impetus for banks to decide
  on risk charges for borrower default based on
  individual risk standing rather than apply a flat
  8 across the board
• Questions were posed-
• Is there sufficient capital to support policy
  guarantees?
• Sufficient capital to support companies with high
  new business growth compared to less dynamic
  companies?
• Sufficient capital to cover mismatching of assets
  and liabilities?
• Sufficient capital to back the risk of corporate
  bond default or risk of market declines for
  equities and property?
• Change was inevitable. Already happened in
  Singapore, India, Australia and Malaysia.

8
MALAYSIA/SINGAPORE DIFFERENCES
PwC
connectedthinking
9
MALAYSIA/SINGAPORE DIFFERENCES

• In Singapore and Malaysia, RBC for general
  insurers is similar
• Both Singapore and Malaysia adopt projected cash
  flow on the life side to determine BE and
  additional PAD ( PRAD in Malaysia). The PAD is to
  cover liability fluctuations up to 75 confidence
  level
• With the Par fund in Singapore, there is
  introduced Surplus Account. The allocation to
  shareholders is by a 90/10 rule by which the
  shareholders are entitled to 10/90 x cost of
  policyholders bonuses
• Shareholders may withdraw the Surplus Account
  only if capital requirements are met. Remaining
  assets in the Par fund are available to meet
  policy liabilities.
• The policy liability of a Par fund is set to
  equal the policy assets i.e. assets less surplus
  account subject to (a) minimum condition
  liabilities i.e. the guaranteed liabilities
  discounted using a risk free discount rate (b)
  guaranteed liabilities non-guaranteed
  liabilities discounted using the best estimate of
  the investment return of the fund ( Singapore) or
  the yield on A2 rated corporate bond ( Malaysia)

10
MALAYSIA/SINGAPORE DIFFERENCES

• In Malaysia, there is no Surplus Account
  concept for the par fund
• The liabilities of the par fund in Malaysia are
  the sum of the present value of guaranteed
  benefits (risk free discount rate) and the
  present value of non- guaranteed benefits i.e.
  bonuses. There is no adjustment for policy assets

11
MALAYSIA/SINGAPORE DIFFERENCES

• The discount rate for the GPV is different.
  Singapore uses the actuarys best estimate of
  fund investment return. Malaysia uses AA rated
  bond yield
• Minimum CAR 120 ( Singapore) 130 ( Malaysia)
• Neither have liquidity tests e.g. assume
  projected future cash flow income sufficient to
  pay out benefits in all circumstances
• With regard to general insurance, Malaysia says
  that if discounting of liabilities is used,
  explicit claims escalation assumptions should be
  used. Singapore just leaves it to the Actuary to
  decide
• In the calculation of C1, the adjustment to
  mortality rates for insurance policies with
  guaranteed premiums and for annuities refers to a
  specified mortality table based on insurance
  company experience 1997-2002. All other
  mortality, expense, dread disease etc adjustments
  are based on the insurers best estimate ( usually
  PAD is 50 of the adjustment. On the other hand,
  in Malaysia, the adjustments refer to best
  estimate throughout but at a higher level e.g.
  non-guaranteed premium 120 of best estimate
  rates whereas Singapore uses 112.5.

12
MALAYSIA/SINGAPORE DIFFERENCES

• For general insurance liabilities in Malaysia,
  the maximum diversification effect i.e. fund PRAD
  is not less than 50 of the sum of the individual
  PRAD by line of business. No such limitation is
  imposed in Singapore.
• Risk free discount rate in Malaysia is based
  completely on the yields for Government
  securities by duration up to 10 years. Thereafter
  based on the 10 year term.
• In Singapore, risk free discount rate is based
  completely on the yields for Government
  securities by duration up to 10 years.
  Thereafter, a stable long term risk free discount
  rate is determined based on the following (i)
  compute the average closing yield of 10 year SGS
  since inception (ii) compute the average yield
  differential between 10 year and 15 year SGS
  (iii) derive an estimated long term yield by
  adding (i) and (ii) (iv) compute average closing
  yield of 15 year SGS over past 6 month period (v)
  allocate 90 weight to the yield in (iii) and 10
  weight to the yield in (iv) and round up to the
  nearest 25 basis points to arrive at the LTRFDR.
  Use LTRFDR for durations of 15 years or more and
  interpolation between 10 and 15 years

13
MALAYSIA/SINGAPORE DIFFERENCES

• If the policy assets are short of either of the 2
  floors, assets must come from surplus account to
  support the policy assets. This deduction may be
  recoverable in future when policy assets exceed
  the 2 floors
• On bonus distribution, Singapore RBC says that
  the cost of bonus will be calculated using the
  MCL basis.
• There are 2 capital requirements (a) fund
  solvency applicable to each insurance fund and
  (b) capital adequacy requirement applicable to
  the insurer overall
• There are 3 components to determine capital
  adequacy requirements.
• C1 is the liability risk charge obtained by
  applying specific risk charges to premium and
  claim liabilities ( general insurers) and by
  applying specific risk margins to the various
  assumptions affecting policy liabilities ( life
  insurers)

14
MALAYSIA/SINGAPORE DIFFERENCES

• C2 relates to asset risks based on exposure to
  bonds, equities etc but it also relates to
  asset/liability mismatching risk
• C3 refers to concentration risk in certain types
  of assets, counterparties or groups of
  counterparties
• Total risk requirement C1C2C3 TRR
• Amount of capital to meet TRR is financial
  resources
• For a fund, the financial resources gt TRR
• For all insurance funds ( except par funds),
  financial resources assets-liabilities. For a
  par fund, financial resources in Singapore
  balance of surplus account liability for
  non-guaranteed benefits
• For Malaysia, each insurer is required to
  determine CAR in its insurance and shareholders
  funds to support total capital required
• CAR is total capital available/ total capital
  required
• For life insurer with par business in a separate
  fund, CAR min (CAR all, CAR all except par)
  reflects the ability of life insurers to adjust
  the level of future bonuses and also preserves
  the principal that surplus of par fund cannot
  support non-par business

15
MALAYSIA/SINGAPORE DIFFERENCES

• Total capital available Tier 1 Tier 2 capital
  in Malaysia Tier 1 is permanent, no maturity
  date, cannot be redeemed, non-cumulative, issued
  and fully paid up.
• In Singapore, total capital available Tier 1
  Tier 2 provision for non-guaranteed benefits(
  in par fund)
• In both Singapore and Malaysia, asset
  inadmissibility rules have been removed ( except
  for items such as goodwill, future tax credits
  etc)
• In Singapore, operational risk has no risk
  charges since it was felt that operational risks
  can be better dealt with by an insurers internal
  risk management systems and supervisory effort
• In Malaysia, operational risk has a specific risk
  charge of 1 of total assets
• In Singapore and Malaysia, there is a
  diversification effect by fund for general
  insurance liabilities but no diversification
  effect for life insurance liabilities or for
  assets. Solvency II specifies diversification
  effect for all.

16
Characteristics of a good RBC system and EWS
PwC
connectedthinking
17
Characteristics of RBC system

• Identifies risk faced by insurers and provides a
  clear framework on how they should be measured
• Asset risks should include credit risk, market
  risk and concentration risk
• Life liability risk should include mortality,
  management and distribution channels expenses,
  persistency, discount rates
• Non-life liability should include claims
  fluctuations through development years and the
  sufficiency of premium to cover unexpired risk
• Diversification risk is taken into account
• Initially, the framework should not be too
  complex. The system can be strengthened and
  enhanced over time.

18
Characteristics of EWS system

• Able to alert the regulators in good time of
  insurers who may be having financial problems
• Should be responsive without being an undue
  burden on insurers
• The key early warning indicator to the regulator
  is the Capital Adequacy Ratio
• However, because certain assumptions are based on
  industry data, additional indicators may be
  needed

19
Project Plan
PwC
connectedthinking
20
Overall timeline
21
Project phases
22
Project phases
23
Project phases
24
Project Office
PwC
connectedthinking
25
As-Is project office
26
To-be project office
To be determined if necessary
27
Barriers to success/Key success factors
PwC
connectedthinking
28
Success factors

• Market education
• Market buy-in to the proposed framework
• Transition arrangements
• Integration of RBC and EWS

29
ASSET RISK CHARGES
PwC
connectedthinking
30
ASSET RISK CHARGES

• The asset value in a RBC regime will be fair
  value or, for listed equities, market value
• We can split assets into 2 types The fist type
  includes bonds, mortgages and preference shares
  for which there is a fixed interest return and a
  probability of default according to how risky is
  the investment.
• The second type includes property and shares
  which are subject to fluctuations in rental
  income, dividends and market values but not to
  default.
• The fair value of assets corresponds to the best
  estimate of liabilities and the probability of
  default ( for the first type) or of market value
  fluctuation (for the second type) enables the
  actuary to determine the appropriate asset risk
  charges to achieve a certain confidence level
• The general question to be answered for each
  investment type is this

31
ASSET RISK CHARGES

• Given the current market value and a risk-free
  investment rate i.e. the investment rate
  generated by Government bonds of appropriate
  duration, what is the discount to current market
  value for which we have a certain level of
  confidence that the market value in 12 months
  time will not be below such discounted market
  value
• The methodology to answer this question for
  listed ordinary shares is similar to the
  Black-Scholes methodology in the pricing of stock
  options and derivatives.
• The assumption is that proportional changes in
  the share price in a short period of time are
  normally distributed or that the actual share
  price at any future time has a log-normal
  distribution

32
ASSET RISK CHARGES

• The mean of the log-normal of the share price at
  any time t in future is given by the formula
• log(n) S(t) log(n) S ( µ -
  s2/2)t
• where S is the current share price, µ is the
  risk-free investment return rate and s the
  volatility of the share price
• Also the standard deviation of log(n) S(t) sv t
• One of the features of a normally distributed
  variable is that there is a 95 probability that
  it has a value within 2 standard deviations of
  its mean
• This provides a method of determining a suitable
  discount to market value at 31 December in
  any year such that we have 95 confidence that
  the actual market value as at 31 December in
  the following year is greater than such
  discounted market value
• It is normal practice with Black-Scholes to use a
  suitable stock market index as a proxy to
  the volatility of a share price

33
ASSET RISK CHARGES

• To illustrate the process, how did we generate
  asset risk charges for insurance companies in
  India?
• Tracked the closing prices in the Bombay SENSEX
  index for each trading day over a period of 10
  years
• Taking the ratio of the index closing price in 1
  day to the previous days closing price, we got
  the inter-day investment return
• We took various time periods such as 90 days, 180
  days and 360 days to determine the average
  volatility of the investment return 20. The
  volatility itself was quite volatile so we
  conducted a number of sensitivity checks with
  volatility ranges from 10 to 30. The greater
  the volatility the greater the discount
• The risk-free investment return was the rate of
  investment return on Indian Government securities
  of 364 days duration

34
ASSET RISK CHARGES

• The risk free rate was 9.5. We conducted
  sensitivity tests using rates 7 - 13
• At 95 confidence interval, the results were

35
ASSET RISK CHARGES

• The discount to market value varies considerably
  by interest rate changes at 10 volatility but
  much less so at higher volatility
• The lower the interest rate for a given
  volatility the higher the discount to market
  value
• Our best estimate discount against market value
  was 25
• For corporate bonds, historical default data from
  LIC
• Once a bond defaulted on a dividend payment, it
  defaulted for all payments afterwards
• Simple probability of default
• Most corporate bonds not rated
• Assumed that coupon rate was correlated with
  rating but cannot group all bonds with a
  certain coupon rate over the 10 year period
• Its the difference between the coupon rate and
  the risk free rate which determines if a bond
  is speculative or not

36
ASSET RISK CHARGES
ASSET RISK CHARGES

• Next we split the minimum and maximum coupon
  rates in a year into 7 equal intervals
  corresponding to ratings AAA to B-
• Assuming a uniform distribution of default over
  the bond duration, we obtained annualised default
  probabilities
• Similar exercises were conducted for residential
  and commercial mortgages, real estate and
  listed and unlisted preference shares

37
GENERAL INSURANCE LIABILITIES
PwC
connectedthinking
38
GENERAL INSURANCE LIABILITIES

• Concept in risk-based capital is liabilities
  determined on a best estimate basis
• 50 chance of being too high and 50 chance of
  too low
• Margin in Singapore, Malaysia and Australia is to
  increase the 50 chance of being too high to 75
  chance i.e. liabilities measured at a 75
  confidence level.
• On top, we have liability risk charges
• To be consistent with asset risk charges, these
  should increase the confidence level from 75 to
  95
• The actuarial determination of claim reserves and
  unexpired risk reserves is statistical. It
  examines historical claim payments to determine
  trends so that future claim payments can be
  estimated
• One actuarial method selects development factors
  based on an analysis of historical claims
  development factors

39
GENERAL INSURANCE LIABILITIES

• The selected development factors are applied to
  cumulative claims data for each line of business
  for each accident or underwriting year for which
  data not yet developed
• This produces an estimated ultimate claims cost
• The claim reserve is the difference between the
  ultimate claims cost and cumulative paid claims
• This is best estimate. 75 confidence level
  figure referred to as provision for adverse
  deviations (PAD) in Singapore- normally
  determined by simulation
• Simulation approach is as follows
• Taking cumulative claim payments throughout
  development years from an accident/underwriting
  year for each business line, we determine the
  ratio of cumulative claims paid up to a
  development year divided by the cumulative
  claims paid up to the prior development year
• From the various ratios in a development year,
  the best estimate is selected

40
GENERAL INSURANCE LIABILITIES

• The selected ratios are applied to the cumulative
  claims data to determine the fitted claims
  development triangle
• The fitted claims data determines the best
  estimate
• The fitted claims data is considered the mean
  of a normal distribution and actual claims
  payments are samples of claim payments taken from
  the underlying normal distribution
• If F is the fitted claims data and A the actual
  claims data, then
• (A-F) x 1/vF is a unit normal distribution
  with mean zero and standard deviation 1
• The simulation bootstrapping consists in
  applying random numbers from 0 to 1 to the
  variable to more closely define the normal
  distribution
• Usual to run 50 simulations 10 times and take the
  average of each mean as the best estimate and the
  average of the PADs as the PAD
• The average of the PADs is divided by the average
  of each mean and expressed in percentage terms

41
GENERAL INSURANCE LIABILITIES

• The percentage is applied to the best estimate to
  determine the appropriate PAD
• The simulation does not depend on the method to
  get best estimate but depends on a random
  selection of the differences between fitted
  claims and actual claims
• Illustration Cumulative paid claims from
  accident year through development years

42
GENERAL INSURANCE LIABILITIES

• Ratio of cumulative paid claims for one
  development year to the cumulative paid claims
  for previous development year and determine
  various averages of the factors

43
GENERAL INSURANCE LIABILITIES
44
GENERAL INSURANCE LIABILITIES

• Diversification effect The best estimate and PAD
  are obtained separately for each line of business
  but the overall PAD is not the sum of the PADs by
  line of business
• Combining short-tailed and long-tailed business
  has the effect of reducing volatility
• Determined by combining claims data for all lines
  and running the simulation again
• The other RBC reserve for general insurance is
  the unexpired risk reserve
• Generally obtained by applying best estimate
  ultimate loss ratio to unexpired premium reserve.
  In addition PAD required on the URR
• Normal distribution assumption applied to assets
  to determine asset risk charges at 95
  confidence limit
• The best estimate plus PAD takes us to 75
  confidence limit.

45
GENERAL INSURANCE LIABILITIES

• Liability risk charges based on the same normal
  distribution assumption will take us
  from 75 confidence limit to 95 confidence limit
• In Singapore, we determined liability risk
  charges by collecting claims data from a
  number of insurers and applied bootstrapping to
  the best estimate plus PAD after allowing for
  the diversification effect for both claim
  reserves and unexpired risk reserves
• This provides the liability risk charges. This is
  added to the asset risk charges (both
  credit risk and market risk)
• The asset concentration risk charges are simply
  100 of an excessive investment according to a
  pre-determined table in any one asset
• Adding them up gives the total risk charges for a
  general insurer

46
LIFE INSURANCE LIABILITIES
PwC
connectedthinking
47
LIFE INSURANCE LIABILITIES

• Determination of life insurance liabilities
  follows the same principles as applied to
  assets and general insurance liabilities
• The artificial net premium valuation of
  liabilities is replaced by an explicit
  prospective analysis of future expected cash
  flows arising from each policy
• The actuary should project cash flows forward
  over the expected contract term taking into
  account any options which could extend the
  contract term, such as term policies with
  renewable options
• The approach requires a projection of expected
  future payments and receipts taking explicitly
  into account actual premiums, investment income
  and investment expenses, mortality and morbidity
  benefits, surrender benefits, lapses,
  distribution costs, management expenses, claim
  expenses ( if not in management expenses),
  reinsurance premiums and recoveries, tax, options
  and guarantee costs

48
LIFE INSURANCE LIABILITIES

• It should be noted that this cash flow projection
  takes explicitly into account expected future
  bonuses for participating policies and expected
  shareholders future dividends
• These are on the actuarys best estimate
  assumptions. An additional margin is required to
  allow for adverse deviation and this would be the
  actuarys estimate of what the assumptions
  would be at 75 confidence interval.
• The liability risk charges are such as to
  increase the confidence limit from 75 to
  95.
• The liability risk charges are prescribed
  percentages to apply to best estimate mortality,
  morbidity, renewal expense, persistency etc
• To illustrate, if the actuarys best estimate
  mortality assumption was 50 TMO 97 and his 75
  confidence interval assumption were 58 TMO 97,
  the mortality component of the liability risk
  charges would be set at, say, 135 of the best
  estimate mortality assumption i.e. 67.5 TMO 97

49
LIFE INSURANCE LIABILITIES

• A logical distinction is made between liabilities
  which are guaranteed (non-participating business,
  basic sum assured, attaching bonus of
  participating business) and liabilities which are
  not guaranteed (future bonuses)
• The discount rate for guaranteed liabilities
  would be a risk-free interest rate i.e.
  the yield on Government securities of
  appropriate duration. The question of
  appropriate duration provides some difficulties
  since there are no Government bonds with
  durations as long as many of the liabilities
• Malaysia specifies that the risk-free discount
  rate should be equal to Government bond yields
  for durations up to 10 years and for cash flow
  after 10 years, the discount rate is the 10 years
  Government bond yield

50
LIFE INSURANCE LIABILITIES

• The justification is that with a normal yield
  curve, yields for durations greater than 10
  years would be higher than the yield for 10 years
  duration
• Therefore conservative.
• The discount rate for non-guaranteed liabilities
  i.e. future bonuses and future shareholders
  dividends should be greater than the risk-free
  rate to reflect the non-guaranteed nature of
  these liabilities
• Singapore directs that the best estimate of the
  investment return of the fund should be used
• Malaysia prescribes it a little more by directing
  the risk-free rate plus a margin should be used.
  The margin is the difference between the yield of
  A rated bond of same duration and the
  risk-free rate

51
LIFE INSURANCE LIABILITIES

• Solvency II in Europe does it differently. The
  discount rate is proposed to be the discount rate
  which equates the discounted value of future
  expected asset cash flows to the current asset
  market value
• The fact that liabilities will generally be
  longer than the asset duration for life insurers
  introduces an asset/liability mismatching risk
• This applies to the value of the guaranteed
  liabilities and the value of fixed interest
  investments.

52
LIFE INSURANCE LIABILITIES

• Suppose V is the liability including PAD based on
  risk-free discount rate and A is
  the fair value of the assets
• Calculate V1 and V2 based on increasing and
  decreasing interest rates
• Both Singapore and Malaysia specify the increases
  and decreases in absolute amount terms by
  duration such as 1.5 for 1 year to 0.8 for 20
  years but it might be an improvement to
  specify the increases and decreases in percentage
  terms by duration
• Calculate A1 and A2 based on increasing and
  decreasing interest rates
• Suppose A-V S, A1-V1S1 and A2-V2S2, the
  asset/liability mismatching risk charge the
  higher reduction in surplus under the increasing
  and decreasing interest rate assumptions

53
LIFE INSURANCE LIABILITIES

• Total risk charges for life insurers are the
  asset risk charges
• (credit and market risk) plus the
  asset/liability mismatching risk plus asset
  concentration risk plus the insurance liability
  risk charges
• Liability risk charges are determined by V-V
  where V is the recalculated value of the
  liabilities based on the 95 confidence limit
  assumptions and V is the value of the
  liabilities at the 75 confidence level

54
CAPITAL ADEQUACY RATIO
PwC
connectedthinking
55
CAPITAL ADEQUACY RATIO

• Key measure of the financial health of an insurer
  in a risk-based capital regime is the
  Capital Adequacy Ratio
• This is the ratio of capital remaining after
  taking into account the best estimate plus PAD
  liabilities divided by the total of the various
  risk charges
• The Capital Adequacy Ratio and the progress of it
  over the years is an early warning to the
  regulator for progressive action

56
CAPITAL ADEQUACY RATIO

• Both Singapore and Malaysia have set minimum
  Capital Adequacy Ratios
• Capital can be split into permanently available
  capital such as shareholders paid-up
  capital, retained surpluses and any property
  revaluation reserve - termed Tier 1 capital and
  other capital of a less permanent nature
• The key feature of Tier 1 capital is that it is
  available to policyholders in the event of
  liquidation
• One point is that the investment of such capital
  has consequential asset risk charges and these
  should be added to the total risk charges before
  determining CAR

57
CAPITAL ADEQUACY RATIO

• The method to determine fair value of assets
  including derivatives is contained in IFRS 39.
  Therefore IFRS 39 should be introduced at the
  same time as Risk-based Capital
• Also IFRS 4 focuses on the differences between
  insurance and investment products and the
  standard of disclosure to assist the layman in
  assessing the financial health of the insurer
• This should also be introduced at the same time.
• Sufficient time should be allowed for testing the
  financial impact of Risk-based Capital to the
  industry in general
• Its also important that the introduction of
  Risk-based Capital is not regarded simply as a
  compliance matter but as a powerful means of
  improving insurance companies financially to the
  benefit of shareholders and policyholders alike.

58
Thank you