Introduction
On 4 November 2022, the Monetary Authority of Singapore ("MAS") issued the "Consultation Paper on Amendments to the Insurance Act and the Insurance (Intermediaries) Regulations" containing its proposals to amend:
the Insurance Act 1966 ("IA") to achieve four main objectives: (1) enhance MAS' supervisory powers; (2) clarify MAS' existing policy intent; (3) align with other IA provisions or MAS-administered Acts; and (4) reflect changes in policy intent; and the Insurance (Intermediaries) Regulations ("IIR") to align the regulations governing insurance brokers with other MAS-administered regulations.
The consultation ends on 13 January 2023.
This Update outlines certain key proposed changes to the IA and IRR.
Key Proposed Amendments to IA
Below we highlight some of the key changes MAS is proposing to achieve its four main objectives.
Objective 1: Enhance MAS' supervisory powers
Anti-commingling policy for licensed insurers and registered insurance brokers
MAS proposes to introduce an anti-commingling policy for licensed insurers which is primarily intended to:
Prohibit insurers from directly undertaking businesses other than insurance business and "permissible businesses". MAS proposes to introduce new provisions that spell out what constitute "permissible businesses". "Permissible businesses" refer to:
insurance business (similarly defined as "insurance business" under the IA); any businesses incidental to insurance business. Business is "incidental" to the conduct of insurance business if such business is necessary to ensure that the insurance business can be conducted satisfactorily. Whether or not a business is "incidental" will also in part depend on the business model of the insurer, and insurers should assess each business on a case-by-case basis to determine whether it is incidental to its insurance business. If in doubt, insurers should consult MAS; any business that may be prescribed or specified by MAS, subject to conditions. MAS states that such list will be business that is related or complementary to the insurance business, and will separately consult on the prescribed/specified list; and any businesses approved by MAS, subject to conditions. If an insurer intends to carry on business arrangements/activities that is not insurance business or incidental thereto or prescribed/specified business, then the insurer has to first seek MAS' approval. Factors that MAS will consider in deciding whether to grant its approval include whether the business is related or complementary to the insurer's insurance business, the strategic value of the business and associated risks.
A flowchart is provided at Annex C to the consultation paper to illustrate how this works.
Prohibit a locally-owned insurer[1] from using or sharing its names, logos or trademarks with a person other than the locally-owned insurer,[2] unless it has obtained MAS prior approval or an exception applies. This prohibition does not apply to captive insurers and special purpose reinsurance vehicles (SPRVs) as their business is confined principally to the risks of their related corporations and sponsors respectively. For foreign-owned insurers,[3] the prohibition will generally not apply as MAS recognises that foreign-owned insurers have limited control over the sharing of name, logo or trademarks as this is generally determined by the head office or related entities. However, if the foreign-owned insurer enters into a partnership or arrangement with any person or acquires a major stake to undertake unregulated financial business or non-financial business, then it must obtain MAS' prior approval before the insurer can share its name.
Prohibit an insurer from acquiring or holding a major stake in any corporation without the prior approval of MAS.
MAS also proposes to introduce anti-commingling requirements for registered insurance brokers, and will issue a further consultation paper on the specific requirements for registered insurance brokers.
Introduce powers to strengthen MAS' oversight of insurers’ outsourcing arrangements. This includes imposing requirements on insurers to conduct due diligence on the service provider before entering into an outsourcing arrangement with the service provider and, on an ongoing basis, include specified provisions in its policies and procedures (for arrangements with its branch or head office), and include specified provisions in contracts (for arrangements with any other persons or corporations). MAS will set out the specific outsourcing requirements in a Notice on Outsourcing by Insurers, and issue a separate consultation on this.
Set out explicit powers allowing MAS to require insurers to restitute their insurance funds for Participating ("Par") and Investment-Linked ("IL") policies.
Objective 2: Clarify MAS' existing policy intent
Impose on captive insurers licensed to carry on life business the requirements to establish insurance funds for IL/non-IL Policies and Par/non-Par Policies, and to allocate Par Fund's surplus to a surplus account. These requirements curren
[1] Insurers incorporated and headquartered in Singapore.
[2] This includes using or sharing of the name, logo or trademark on or with (i) a physical infrastructure that is not owned by the insurer; or (ii) any other entities.
[3] Insurers incorporated in Singapore but headquartered outside of Singapore and insurers incorporated outside of Singapore.
