In this e-Alert, we review the position of participating funds in Singapore as of year-end 2025, based on public information published in 2026, and compare this to the position at year-end 2024. We examine investments, along with solvency and capital.
Key observations:
- While financial stability ratings (FSRs) decreased over 2025, the strong investment performance over the year should have helped to improve bonus supportability.
- Average investment returns over the past five years have still not fully offset the very poor returns in 2021 and 2022 relative to the illustration cap rate of 4.25%, but if returns continue to be strong, long-term historical returns will continue to improve.
- Recent good performance will also have helped new premium income that would not have been affected by the earlier negative returns, further strengthening bonus supportability of the funds.
- A decrease in FSRs, despite the very strong investment returns, is perhaps an indication of shortcomings in insurers' management of interest rate risk.
- Despite the economic effects of the war in Iran, equity markets have continued their strong growth in 2026.
- Based on current economic positions, we expect Singapore par funds to be in stronger positions at year-end 2026 compared with year-end 2025, both in terms of bonus supportability and solvency.
- Amid the ongoing war Ukraine, along with other geopolitical events and their implications, current economic conditions feel quite volatile, and things could still change significantly between now and year-end.