Orphaned money doesn't exist

Straits Times Forum
August 24, 2009 Monday

With reference to letters by Mr Larry Haverkamp, 'Orphaned money: Key question MAS has not addressed', and Mr Tan Kin Lian, 'Concept of asset share is fairer to policyholders'. Darren Thomson, President of The Life Insurance Association Singapore and Frank McInerney, President of the Singapore Actuarial Society clarifies some misleading comments.

First, 'orphaned money' does not exist in the participating fund ('par fund') of life insurers in Singapore. Life insurers are required under the insurance regulations in Singapore to hold all par fund policy assets to support par policies. Any gains or losses from early surrender will be retained in the par fund and shared by the remaining par policies.

Second, the concept of 'asset share' is widely used by life insurers in Singapore to determine bonuses for each cohort of par policies within the par fund. As well as other factors such as long-term solvency of par fund.

Third, as the primary objective of par policies is to provide stable medium- to long-term returns, life insurers have to smooth bonuses declared from year to year. This means the payout may be higher than its asset share in certain years and lower in other years.