Wenzhe Sheng
Senior Product Manager of Regulatory Tech
Wenzhe joined the Clearwater Analytics team in 2022 and is based in our London office. He has more than a decade of experience in investment operations, accounting, and regulations through his experience at J.P. Morgan and GSI-backed life insurance firms. During this time, he was a working member and directly engaged with UK regulators on key regulatory initiatives, such as UK PRA’s Solvency II reform and the Bank of England’s Transforming Data Collection programme.
As a Senior Product Manager, Wenzhe oversees Clearwater’s UK and EU insurance regulatory product and is an expert in helping our clients navigate through the complex and evolving regulations in Europe.
How do we mitigate risk? That’s a consistent question for everyone involved in the insurance industry, and while risk is categorised differently depending on viewpoint, regulatory risk will always stand out, particularly for insurers operating under the new risk-based capital (RBC) regimes in Asia.
Our 2024 Hong Kong & Singapore Insurance Outlook Report highlighted the anticipated regulatory developments in 2024 as one of the biggest challenges on the horizon for insurers and institutional asset managers of all sizes.
Current Market Landscape
From balancing your yield-adjusted return to your balance sheet’s economic constraints, increasing scope and granularity of investment and liability reporting data, monitoring your asset performance to capital constraints in its allocation, and governance, risk management and disclosure overhaul. These elements of RBC continue to create a daily challenge for insurers under Singapore’s RBC2, to adapt quickly and seamlessly to the regulatory change. This year Hong Kong too will enter its own RBC regime. Many companies are worried and looking for best practice to minimise the risk associated with interpreting, implementing, and reporting in line with this change.
In the context of the Asia Pacific markets, the Monetary Authority of Singapore (MAS) classified four major insurers as ‘too big to fail,’ under the D-SII framework. This has led to increased regulatory standard and closer supervision on them, with 25% capital add-on made up of its highest quality capital requirement (CET1). Nonetheless, insurers in the market are subject to the Singapore RBC2 regime where the regulation requires them to closely monitor, measure, and disclosure on their comprehensiveness of risk coverage and risk sensitivity to changing operating environment, where strategy and governance must be in place to mitigate any risks.
But as for tackling regulatory change, there is no consensus on the best method to minimise the risks associated, however there is best practice that can be observed when comparing its own rules to international standard set by the IAIS or other developed economics. Hong Kong’s insurance industry will reach a new milestone in 2024, as the overhaul of insurance supervision moves to HKRBC regime.
On April 25th, 2024, the Hong Kong Insurance Authority published the consultation conclusion on draft coverings rules on its own RBC regime. These included, for example, 41R Valuation and Capital, 41S Submission of Statements, Reports, and Information, 41T Maintenance of Assets in Hong Kong, 41V Insurance (Lloyd’s) Rules and so on. This has moved HK Insurance Supervision forward to align with international standard set by jurisdictions like the UK, EU, Singapore, and Switzerland, specifically the Solvency II regime.
From speaking to Clearwater clients, the challenges faced by Hong Kong-based insurers during its implementation and post-implementation of regulatory change are comparable to our Solvency II and Solvency UK clients. These challenges focus primarily on their investment asset data reporting, interpretation of the regulatory guidance on modelling including capital requirement, and the scale and breadth of the regulatory coverage across the three pillars.
Change is broad, so we asked key decision makers from our client base in Europe and Asia, specifically what it was about that kept them up at night. It is not surprised that regulatory changes, meeting reporting demands and timelines, and dealing with varying requirements across different regimes are mentioned again and again.
Zooming out from the microscope, we see some alignments on regulatory convergence among European and Asian jurisdictions, but under the lense there are differences that become hard to navigate. So, the question is… Where are you on that journey today? Is your implementation of RBC regimes seamlessly embedded into your operational process?
Clearwater is well prepared to partner with you in taking on the growing regulatory challenges across Asia Pacific and further afield. With clients in Singapore, Hong Kong, Thailand, Japan and beyond, our automated, accurate, and transparent solution streamlines investment accounting and helps firms accelerate the adoption of new regulations and manage the ongoing changes to guidance and standards such as RBC, IFRS, PSAK (Indonesia) and TFRS (Thailand), as well as ESG reporting.
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