Explanatory Brief: Insurance (Amendment) Bill 2003
The Deputy Prime Minister, Minister for Finance, and Chairman of the Monetary Authority of Singapore ("MAS") today moved the Insurance (Amendment) Bill for first reading in Parliament.
2 As part of MAS' on-going effort to improve the regulatory framework for the insurance sector, this Bill will establish a risk-based capital ("RBC") framework for life insurance and general insurance companies, and a regulatory framework to govern health insurance business. To strengthen MAS' supervision of reinsurance services delivered in Singapore, an authorisation framework to govern the cross-border supply of reinsurance will also be established. In addition, miscellaneous amendments are made for the administration of the Insurance Act ("the Act").
3 MAS conducted a public consultation exercise on earlier drafts of the Bill in May 2003. MAS has considered the comments received and incorporated them into the Bill. MAS' response to the public consultation is published on its website at www.mas.gov.sg.
Key Amendments in the Bill
4 Amendments relating to the risk-based capital framework are as follows:
a) Establishment of accounting treatment for insurance fund - The amendment clarifies that the Authority may set rules on what constitutes receipts, income, liabilities or expenses of an insurance fund.
b) Establishment of a "Surplus Account" - A "Surplus Account" will be established within each life insurance fund that contains participating policies (otherwise know as "with-profit policies") to better keep track of capital support that life insurers provide to the funds.
c) Establishment of "fund solvency requirement" and "capital adequacy requirement" - The "fund solvency requirement" and "capital adequacy requirement" which take into account risks arising from the assets and liabilities of insurance operations will replace the existing "fund margin of solvency" and "margin of solvency" requirements.
5 Amendments relating to the health insurance regulatory framework include:
a) Definition of "accident and health benefits" - The term "accident and health benefits" will be defined to set the scope of the framework. Included under this definition are products commonly known as medical expense insurance, disability income insurance, long-term care insurance, critical illness insurance, managed healthcare schemes and personal accident insurance.
b) Reclassification of insurance business - Insurance business is reclassified such that accident and health insurance products that create long-term financial obligation for insurers, which originally belong to general insurance business, will be treated as part of life insurance business.
c) Establishment of market conduct rules - The Bill will provide MAS the power to specify market conduct requirements such as information that should be disclosed to clients, standards relating to the provision of advice, and training and competency of insurance intermediaries. The health insurance regulatory framework will be the first to draw powers from the new provisions in establishing the minimum disclosure and advisory process standards.
6 For better supervisory control over cross-border reinsurers' transaction with locally registered insurers, the Bill will require all such reinsurers to obtain MAS' authorisation before they can solicit Singapore business. The Bill will also allow MAS to prescribe subsequently in regulations the minimum financial and reporting requirements that such cross-border reinsurers should meet.