MAS Issues Amended Regulation to Encourage Financial Guarantee Insurance
24 Aug 1999...MAS today issued the Insurance (Financial Guarantee Insurance) (Amendment) Regulation 1999. The amended regulation allows multi-line insurers and reinsurers to engage in financial guarantee insurance business. It also stipulates a new requirement for licensed financial guarantee insurers to build up specific contingency reserves to meet unexpected large claims.
MAS said that the amended regulations also eases a previous restriction that allowed only Singapore-incorporated subsidiaries of specialised financial guarantee insurers to operate in Singapore. With the amendments, financial guarantee insurers can now establish branch operations to carry on financial guarantee insurance business in Singapore.
Explaining the rationale behind the amendments, Mrs Lim Shu Chiau, Executive Director of MAS' Insurance Department, said that "financial guarantee insurers can contribute significantly to Singapore's development as a premier insurance centre. By allowing them the flexibility of establishing branch operations , we hope to attract more players to base their regional operations in Singapore."
MAS also said that promoting financial guarantee insurance would have positive spillover effects for other financial industries in Singapore. "Financial guarantee insurance enhances the credit standing of guaranteed debt issues. This would have a synergistic effect on the MAS' efforts to develop Singapore as an international debt hub", said Mrs Lim.
On the requirement to set up specific contingency reserve, MAS said that insurers would contribute a certain percentage of their net premiums annually towards a reserve fund. This prudential requirement will ensure that insurers build up contingency reserves to meet unexpected large claims. Such a requirement would contribute to the long-term soundness and resilience of the insurance industry. MAS said that this new requirement is similar to that established in the New York State, home to major financial guarantee insurers.