Risk-off shift amid global volatility drives $2.8b into money market funds, tempering investment-linked policy sales.

In 2025, Singapore's insurance fund management segment experienced subdued activity as escalating global market uncertainties drove a record $2.8 billion inflow into money market funds, a threefold increase over the previous quarter, while regulators moved to tighten oversight. The pullback from risk assets marked a clear shift in investor behaviour away from investment-linked insurance products, which are typically tied to equity and balanced funds, and toward capital preservation instruments. The Monetary Authority of Singapore (MAS) responded by reviewing liquidity risk frameworks and proposing stricter advertisement rules for licensed fund management companies (LFMCs), signalling heightened supervisory attention to the nexus between fund management and insurance distribution.

Weaker Global Markets Temper Risk Appetite

The macroeconomic backdrop for insurance-linked fund management in Singapore deteriorated markedly through 2025. The MAS Financial Stability Review, published in November 2025, noted that "risks may manifest as sharp repricing shocks, with the potential to cause spikes in investment fund redemptions or impose capital losses on insurers." The review explicitly advised that "insurers should remain vigilant and closely monitor their capital and liquidity positions, and business strategy risks amid continuing market volatilities" (Source 6). This assessment reflected a global environment characterised by elevated trade tensions, geopolitical uncertainty, and volatile interest rate expectations that weighed on investor confidence throughout the year.

The impact on insurance-linked fund management was direct. Industry data from the Life Insurance Association's Second-Quarter 2025 Performance and Risk Monitoring Report showed mixed performance across fund categories, with equity-linked insurance funds—particularly in the technology and healthcare sectors—posting negative returns in the quarter. EAA Insurance Sector Equity Healthcare funds, for example, recorded a -9.72% return, while US Large-Cap Growth Equity insurance funds fell 3.00% (Source 2). These returns, compiled by Morningstar, underscored the challenge facing insurers marketing investment-linked policies (ILPs) tied to growth-oriented underlying funds. The subdued activity in the insurance fund management segment, as noted in industry summaries, reflected these weaker global market conditions that tempered investment-linked policy sales (Source 1).

Investors Flock to Money Market Funds

The most concrete indicator of the risk-off shift was the surge in demand for money market funds in Singapore. According to the FundSingapore/Morningstar Q2 2025 report, net inflows into the asset class reached $2.8 billion in the second quarter, tripling compared with the $0.93 billion estimated from the previous quarter (Source 7). This threefold increase represented a flight to liquidity and safety that paralleled global patterns, as investors sought refuge from equity market volatility and uncertainty around the direction of monetary policy.

Net Inflows ($B)Source: Orionmano Industries

The magnitude of this inflow is significant in context. The Q2 2025 net inflow into money market funds alone exceeded the combined quarterly net inflows into all Singapore-registered fund categories in several prior quarters. This risk-off move directly undermined demand for investment-linked policies, which typically channel premiums into equity, balanced, and multi-asset funds that carry higher risk and return profiles. Insurers offering ILPs—including major players such as AIA, Great Eastern, HSBC Life, and Manulife, whose fund performance data appears in the LIA report—were confronted with a market environment increasingly unsympathetic to growth-oriented products (Source 2). The shift was particularly pronounced for ILPs tied to US large-cap growth equity, technology sector equity, and emerging market equity categories, all of which posted negative or below-average returns in the quarter.

Regulatory Response to Emerging Risks

MAS moved proactively during 2025 to address vulnerabilities highlighted by the market turbulence. On 23 April 2025, MAS Managing Director Mr. Chia Der Jiun announced a review of the liquidity risk management framework applicable to LFMCs during the annual Investment Management Association of Singapore Investment Conference. The review, as detailed in a July 2025 regulatory update from Sidley Austin, aims "to enhance the resilience of Singapore's fund management industry in normal and stressed market conditions" and aligns with calls by global bodies including the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO) "to reinforce consistency between a fund's investment strategy and liquidity with redemption terms" (Source 3).

Concurrently, MAS proposed to remove existing exclusions from product advertisement rules for LFMCs, meaning that fund management companies would be required to comply with advertising requirements "regardless of the target audience"—including institutional and accredited investors who were previously exempt (Source 3). This regulatory tightening reflects a broader concern that the rapid shift into money market funds and the corresponding slowdown in ILP sales could expose gaps in both fund liquidity management and consumer disclosure. MAS has engaged the industry on the proposed changes and will announce implementation timelines when ready (Source 3).

Given persistent global uncertainty and MAS's tightening of fund management regulations, insurance-linked fund management in Singapore is likely to remain subdued in early 2026, with investors continuing to prioritize liquidity and capital preservation over growth-oriented investment-linked policies. The combination of volatile equity markets, strong money market fund inflows, and an increasingly stringent regulatory environment suggests that insurers will need to recalibrate their product offerings and risk management frameworks to align with the new market reality.