26 July 2018
On 9 July 2018, the Deposit Insurance and Policy Owners’ Protection Schemes (Amendment) Bill (“Bill”) was passed in Parliament.
The Deposit Insurance and Policy Owners’ Protection Schemes Act (“DI-PPF Act”) governs the operation of the Deposit Insurance Scheme (“DI Scheme”) and the Policy Owners’ Protection Scheme (“PPF Scheme”). The DI Scheme and PPF Scheme were implemented in 2006 and 2011 respectively to protect the savings of small depositors and owners of commonly purchased insurance policies should a member bank or insurer fail.
The DI-PPF Act is being amended to ensure depositors and policy owners continue to have an adequate level of protection and to enhance the operational processes of the Schemes.
Raise DI coverage limit from S$50,000 to S$75,000
The DI Scheme currently insures Singapore Dollar non-bank deposits held with full banks and finance companies up to S$50,000 per depositor per scheme member. The Bill will raise the DI coverage limit from S$50,000 to S$75,000. This will ensure that the vast majority of depositors are fully insured. To support the higher coverage limit, the Bill will raise the annual premium contributions from Scheme members to the Deposit Insurance Fund by up to one basis point per Scheme member. At the same time, the fund build-up period will be extended from 2020 to 2028.
Extend PPF coverage to certain types of properties and setting limits on compensation payouts
The Bill will introduce a definition for “personal” insurance policy as one that is issued to a natural person. The effect of this amendment is to extend protection to claims on damage to properties owned and used by individuals, even if these properties are sometimes used for commercial purposes.
The Monetary Authority of Singapore (“MAS”) will be empowered under the Bill to prescribe in regulations caps on compensation payouts for specific classes or types of policy or claim event insured under the PPF Scheme. Currently, there are caps on compensation payout for life insurance, but not for specified Singapore personal lines insurance policies. This means that the PPF fund could potentially be exposed to very large claims, which could translate into higher premium rates for all consumers. This amendment will allow MAS to mitigate the exposure of the PPF Scheme to very large claims, and contain the potential of rising premium rates.
Currently, MAS may make a determination for compensation to be paid out when a Scheme member is wound up by a court in Singapore or elsewhere, or if MAS is of the opinion that a Scheme member is insolvent, unable or likely to become unable to meet its obligations or about to suspend payments.
There is currently no trigger for payout in the event of a voluntary winding up of a Scheme member. The Bill will include voluntary winding up as a trigger for compensation payout under both the DI Scheme and the PPF Scheme. The amendment closes this gap and expedites the compensation process.
- Deposit Insurance and Policy Owners’ Protection Scheme (Amendment) Bill
- Second Reading Speech by Mr Ong Ye Kung, Minister for Education on behalf of Mr Tharman Shanmugaratnam, Deputy Prime Minister and Minister-in-charge of the MAS