Rates of return reviewed regularly

THERE have been recent discussions on the topic of projections and payouts of participating (par) products by life insurers in Singapore. In particular, we refer to the commentary, "Realistic projections by insurers is crucial to building trust" (BT, Feb 2 2016).

The Life Insurance Association, Singapore (LIA Singapore) agrees with the reporter that illustration rates need to be reviewed regularly. The projected investment rate of return used in the Benefit Illustration (BI) for par products are indeed reviewed by the association annually to ensure their continued relevance and appropriateness.

In this annual process, a review of the expected long-term investment returns for each specific asset class is performed by taking into account macroeconomic factors such as gross domestic product (GDP) growth and inflation expectations. A benchmark asset portfolio based on industry averages is determined, and a benchmark portfolio return is derived from multiplying the expected long-term investment returns of the asset classes by the percentage allocation to the asset class in the benchmark asset portfolio.