The Monetary Authority of Singapore (MAS) proposed various amendments to the Insurance Act (Cap. 142) (IA) between May 2009 and September 2012.

The stated purposes of the amendments are to:

  1. enhance the MAS’ powers to meet supervisory objectives;
  2. improve the clarity of the MAS’ stated policy towards the insurance market;
  3. align the IA with other MAS-administered legislation; and
  4. remove obsolete provisions from the IA.

These amendments are expected to come into effect in the first half of 2013.

Overview of the key amendments to the IA

We set out below a summary of major amendments to the IA by reference to the MAS’ stated purposes for the reforms.

Enhance the MAS’ power to meet supervisory objectives

  • Asset maintenance — The IA currently empowers the MAS to issue directions to insurers to maintain assets in Singapore but only if there are grounds for the MAS to cancel the insurer’s registration. There is a concern that this rule may not allow the MAS to respond quickly enough to preserve an insurer’s assets in a crisis. For example, the MAS would need to wait until the insurer is liable for de-registration before it can take pre-emptive measures to safeguard policyholders’ interests. In this context, it is proposed that the MAS have the power to impose asset maintenance requirements on insurers without any pre-conditions.
  • Foreign supervision — It is proposed that the IA be amended to equip the MAS with powers to:
    • allow foreign supervisors to inspect insurers in Singapore;
    • provide supervisory information to an insurer’s parent company (aka – head office) and the foreign insurance regulator supervising that company;
    • inspect the overseas branches and subsidiaries of Singapore-based insurers; and
    • impose explicit confidentiality requirements on recipients of the MAS’ inspection reports.

These reforms will align the IA with other MAS-administered legislation.

  • Remove key personnel — It is proposed that the MAS be given the power to remove individuals from any key position within an authorised insurer.

Improve clarity of the MAS’ policy

  • The definition of “carrying on of insurance business” — It is proposed that the definition be updated to include both the product manufacturing and distribution aspects of an insurer’s business. This reflects the MAS’ concern that the current definition no longer captures the range of new activities conducted by insurers and intermediaries.
  • The definition of “solicitation” — The IA currently prohibits solicitation of insurance business by unregistered insurers. The MAS proposes to amend the definition of “solicitation” to specify that only the officer registered to carry on business in Singapore be allowed to solicit insurance business in Singapore. This will prohibit individuals from an insurer’s head office or foreign branches from soliciting for business in Singapore. In addition, any registered insurer will not be allowed to co-brand its insurance products and services in Singapore with a foreign or unregistered insurer.

Align with other MAS-administered Acts

  • Approve and remove persons who have substantial shareholding or control of locally-incorporated insurers — It is proposed that substantial shareholders and controllers of an insurer must meet “fit and proper” criteria and the MAS be empowered to approve or remove such persons according to this requirement.
  • Disqualification of directors and executive officers of insurers — It is proposed that insurers will need to seek the MAS’ consent to appoint or continue to appoint persons as directors or executive officers who do not meet the “fit and proper” criteria.

Remove obsolete provisions

  • Delete solvency requirements for offshore insurance funds — The IA currently requires offshore insurance funds to meet certain solvency requirements. However, the MAS considers that these requirements are now obsolete, and should be deleted, due to the introduction of risk-based capital requirements.
  • Delete payment of life policy money in Singapore currency — The IA requires indemnity payments for life policies issued in Singapore to be paid in the Singapore dollars, unless otherwise agreed between the insurer and the beneficiary. It is proposed that this provision be deleted as it is inconsistent with current market practices where insurers offer products with payouts in foreign currency.

Conclusion

The amendments to the IA will ensure the MAS keeps pace with the changing nature of the insurance market. The changes appear to be consistent with the MAS’ general approach to insurance regulation and should not be controversial for most Singapore insurers. The most significant impact is likely to be felt by insurers that rely on offshore staff as part of their front-line marketing team. Under the new definition of “solicitation”, these individuals will be restricted from carrying on insurance business in Singapore.

Please see the MAS’ Consultation Paper for full details of proposed changes to the IA (including the full text of the Draft IA Bill).