On 19 September 2012, the Monetary Authority of Singapore (the “MAS”) issued a consultation paper entitled “Proposed Revision to the Definition of ‘Singapore Policy’ and ‘Trade Credit Insurer’” (the “Consultation Paper”).
The Consultation Paper contains proposals to revise the definitions of:
- “Singapore policy” for the purposes of the Insurance Act (the “IA”);
- “trade credit insurer” and “trade credit insurance policies” for the purposes of the Insurance (Valuation and Capital) Regulations 2004 (the “V&C Regulations”).
Definition of “Singapore policy”
Life policy or accident and health policy (“A&H policy”)
Paragraph 2(1)(a) of the First Schedule to the IA ( “Paragraph 2(1)(a)”) provides, among other things, that “Singapore policy”, in relation to a life policy or A&H policy, means a policy where the policy owner is:
- an individual, the policy owner or insured is ordinarily resident in Singapore; or
- not an individual, the policy owner’s address is or was an address in Singapore.
Where an individual who is ordinarily resident in Singapore sets up an overseas trust to purchase life insurance policies insuring himself, such policies are not “Singapore policies” under the current definition because the address of the policy owner (i.e. the overseas trust) is not in Singapore. The MAS proposes to revise Paragraph 2(1)(a) so that such policies will be classified as “Singapore policies” as long as the insured is ordinarily resident in Singapore.
Treaty life reinsurance and treaty A&H reinsurance
The IA provides that Paragraph 2(1)(a) will apply to a facultative life or A&H reinsurance contract and a treaty life or A&H reinsurance contract to determine whether it is a “Singapore policy”, as stipulated in Paragraph 2(5) of the First Schedule to the IA. The MAS highlights that the current definition of “Singapore policy” is more appropriate for a facultative reinsurance contract and not for a treaty reinsurance contract. Therefore, a separate definition of “Singapore policy” for treaty life or A&H reinsurance contract will be introduced in the IA.
Facultative general reinsurance
Paragraph 2(1)(b) of the First Schedule to the IA provides that, in relation to facultative general reinsurance, a “Singapore policy” is a policy where the risk arises in Singapore or where the insured is a person resident in Singapore or has a permanent establishment in Singapore. Under this existing definition, the policy classification of the facultative general reinsurance policy depends on the residency of the insured which may be different from that of the underlying direct general insurance policy being reinsured.
The MAS proposes to revise the definition of “Singapore policy” for facultative general reinsurance so that the policy classification of a facultative general reinsurance policy will follow that of the underlying direct general policy being reinsured (given that both policies relate to the same risk), and not the residency of the insured.
Definition of “trade credit insurer” and “trade credit insurance policies”
In order to accurately reflect the policy intent of the MAS, the definitions of “trade credit insurer” and “trade credit insurance policies” in the V&C Regulations will be replaced with “credit insurer” and “credit insurance policies” respectively. The proposed definitions are also aligned with that of other international jurisdictions.
Submission of feedback
Comments and feedback on the proposals in the Consultation Paper must be submitted to the MAS by 19 October 2012.