Australia and Singapore lead the region in regulatory sophistication for the insurance sector, comparing favourably to advanced global markets, although Asia-Pacific more broadly lags behind Europe and the US in regulatory oversight, a Standard & Poor’s Ratings Services report revealed.

"Asia-Pacific's insurance markets are at different stages of development, but Australia and Singapore lead the region in regulatory sophistication, and Japan is expected to move closer in the coming years,” said credit analyst Michael Vine.

Country-specific regulatory initiatives in the insurance sector are driving improvements in internal control frameworks across a number of areas, including capital adequacy, enterprise risk management frameworks, corporate governance practices, reinsurance arrangements, and group-wide supervision, the S&P report said.

It noted that mature markets in the region are responding to elevated expectations for risk management and group supervision, and greater alignment with Insurance Core Principles for regulatory oversight as outlined by the International Association of Insurance Supervisors (IAIS).

"We see this advancement in regulatory oversight and improvement in risk management capability as positive to insurer credit profiles,” said credit analyst Natasha Hall.

Within the region, regulators have applied for temporary equivalence under the Solvency II capital regime, including Australian Prudential Regulation Authority, Monetary Authority of Singapore, Hong Kong’s Office of the Commissioner of Insurance, and China Insurance Regulatory Commission.

Other regulators in the region are at a much earlier stage of attaining regulatory sophistication, including Taiwan's Financial Supervisory Commission, while the Philippines is a downside outlier, the report said.