Knowledge Highlights 18 January 2023
MAS consults on amendments to Insurance Act 1966 and Insurance (Intermediaries) Regulations to take into account regulatory and market developments
Knowledge Highlights 10 November 2022
On 4 November 2022, the Monetary Authority of Singapore (“MAS”) issued a consultation paper seeking feedback on amendments to the Insurance Act 1966 (“IA”) and the Insurance (Intermediaries) Regulations (“IRR”). The consultation closes on 13 January 2023.
The IA provides an integrated regulatory framework for persons engaging in insurance business and acting as insurance intermediaries in Singapore. In the consultation paper, MAS proposes amendments to the IA to take into account regulatory and market developments, as well as to align the regulatory framework for insurance with that of other financial activities regulated by MAS. MAS also proposes amendments relating to insurance brokers in the IRR for alignment with other MAS-administered regulations.
Amendments to Insurance Act 1966
Enhance MAS’ powers to better achieve supervisory objectives
- Anti-commingling policy: MAS proposes to introduce a policy to regulate the conduct of and investment in insurance and non-insurance businesses by insurers in Singapore. This anti-commingling policy will ensure that insurers remain focused on their core insurance business and competencies and avoid potential contagion from the conduct of non-insurance businesses. Insurers will generally be prohibited from (1) directly undertaking businesses other than insurance business, business incidental to their insurance business, and businesses prescribed, specified or approved by MAS; (2) using or sharing their names, logos or trademarks on or with physical infrastructure or any other entities; and (3) acquiring or holding a major stake in any corporation without MAS’ prior approval.
The amendments also extend the proposed anti-commingling powers to registered insurance brokers. MAS will conduct further public consultation prior to the introduction of specific anti-commingling requirements for registered insurance brokers.
- Outsourcing arrangements: MAS proposes to strengthen its oversight of insurers’ outsourcing arrangements, including arrangements with a branch or head office of the insurer. MAS will be empowered to require insurers to:
- conduct due diligence on the service provider; and
- include in their policy and procedures (for arrangements with the branch or head office) or outsourcing contracts (for all other persons or corporations), as the case may be, provisions relating to (1) the protection of confidentiality of customer information; (2) the right of MAS or the insurer to audit the books of the service provider; (3) provision of any record, document, information or report relating to the outsourcing arrangement to MAS upon request; (4) termination of the outsourcing contract under specific circumstances; and (5) the right to sub-contract only under specified conditions.
MAS will separately carry out a public consultation on the specific outsourcing requirements.
- Restitution of insurance funds: MAS proposes to set out explicit powers to require insurers to restitute their insurance funds for participating (“Par”) and investment-linked (“IL”) policies.
Provide more clarity on MAS’ existing policy intent
- Separate funds for captive insurers carrying on life business: Currently, as set out in section 16(2), (3) and (7) of the IA, direct insurers licensed to carry on life business are required to establish and maintain separate insurance funds for IL policies, non-IL policies, Par policies and non-Par policies, and to allocate surplus of Par policies to a surplus account. MAS proposes to extend these requirements to captive insurers licensed to carry on life business as well.
- Separate insurance funds for reinsurers: Currently, section 16(2) and (3) requires only direct insurers licensed to carry on life business to further establish and maintain separate funds for IL policies, Par policies and non-Par policies. MAS proposes to amend these provisions to include reinsurers.
- Approval of actuary for captive insurers licensed to carry on life business: Section 35(1)(b) of the IA only requires a direct insurer licensed to carry on life business to have an appointed actuary. MAS proposes to amend section 35(1) to require a captive insurer licensed to carry on life business to appoint an actuary that must be approved by MAS.
- Definition of marine mutual insurance business: MAS proposes to amend the definition of “marine mutual insurance business” in section 2 of the IA to clarify that marine mutual insurers (1) are able to write non-mutual business as long as the majority of the gross premiums written by them pertains to mutual business; and (2) must be able to make supplementary premium calls in order for a business to be considered a mutual business.
Align with other provisions within IA or other MAS-administered Acts
MAS also proposes amendments which will align provisions in the IA with other provisions in the IA and other MAS-administered Acts, such as the Banking Act 1970, the Securities and Futures Act 2001 and the Financial Advisers Act 2001. These proposals include amendments to:
- include a penalty provision to take action against insurers and insurance brokers that fail to take reasonable care to ensure accuracy of returns lodged with MAS;
- empower MAS to require insurers and registered insurance brokers to notify MAS if any of their chairpersons, directors and key executive persons are no longer fit and proper;
- empower MAS to prescribe the maximum term for a key executive person’s appointment;
- allow MAS to remove executive officers who are not fit and proper and include additional considerations for the removal of chairpersons, directors, key executive persons and executive officers;
- widen the scope of circumstances under which statements made by insurance intermediaries would be deemed as false or misleading;
- widen the grounds for MAS to refuse an application or cancel the registration of a registered insurance broker; and
- empower MAS to remove an effective controller of a registered insurance broker who is not fit and proper.
Update provisions to reflect changes in policy intent
- Reinsurance deposit requirement: To reduce the authorised reinsurers’ administrative burden in managing the fixed deposit, MAS proposes to remove fixed deposits as a form of reinsurance deposit. Consequently, only a bank covenant would be accepted as reinsurance deposit.
- Revision to nomination of beneficiaries (“NOB”) framework: MAS proposes to update the NOB framework to allow policy owners of joint life insurance policies to effect trust or revocable nominations, subject to certain conditions.
- Definition of “accounting period”: MAS proposes to remove the flexibility to vary the definition of “accounting period” under section 2 of the IA.
Amendments to Insurance (Intermediaries) Regulations
- Notification of material adverse developments: To achieve effective supervisory oversight based on updated information, MAS proposes to amend the IIR to require registered insurance brokers to notify MAS of:
- any adverse development that materially affects or is likely to materially affect (1) the registered insurance broker; (2) any entity in the group of the registered insurance broker to the extent that the developments materially and adversely affect the registered insurance broker; and
- matters affecting the fitness and propriety of the registered insurance broker’s (1) substantial shareholders or controllers; and (2) key officers.
- Compliance, risk management and internal controls: MAS expects regulated financial institutions to have in place compliance arrangements, risk management policies and internal controls that are commensurate with the nature, scale and complexity of their business. Such expectations have been set out in legislation for banks, insurers, capital markets intermediaries and licensed financial advisers. To rationalise existing expectations of registered insurance brokers, MAS proposes to introduce a similar provision in the IIR for registered insurance brokers.
The consultation paper is available on the relevant webpage of the MAS website www.mas.gov.sg.
Knowledge Highlights 25 January 2023