Dear Editor,
I refer to “Do more to protect policy holders” (Straits Times Forum, 22 September 2008).
2 Under the deposit insurance scheme, administered by the Singapore Deposit Insurance Corporation (SDIC), an individual’s Singapore dollar current, savings and fixed deposit accounts with a full bank or finance company in Singapore have an aggregate coverage of up to S$20,000 per institution. This coverage fully insures more than 80% of individual depositors in Singapore and is within international norms of 80% to 90%.
3 MAS, together with the SDIC, will review the coverage limit regularly, taking into consideration the objectives of the scheme and international norms. In determining the appropriate coverage limit, our primary objective is to provide adequate protection for small depositors. Depositors should also be aware that the higher the coverage, the higher the cost of this protection, which may then be passed on to them.
4 As for protection for insurance policy owners, MAS requires all insurers to establish a separate insurance fund for each class of business. The assets in each fund can only be used to meet the fund's expenses and liabilities and each fund's assets must, at all times, exceed its liabilities plus a safety margin imposed by MAS. At the company level, each insurer must also maintain capital adequacy of at least 120 per cent of the required total safety margin. All insurers, including the AIG-owned insurance entities in Singapore, currently meet these regulatory requirements. If an insurer ceases operations, its assets will be used to compensate policy owners. The Insurance Act accords priority to the claims of policy owners, ahead of other unsecured creditors, over the assets of the insurer and its insurance funds.
5 In the unlikely event that an insurer is unable to meet it obligations to policy owners, the Insurance Act already provides for the setting up of a Policy Owner's Protection Fund ("PPF") to compensate policy owners. Under the current provisions, the PPF will cover up to 90% of an insurer's liability on any life policy. For motor bodily injury and work injury insurance policies, the PPF provisions will cover 100% of an insurer's liability arising from compulsory insurance policies underwritten by the insurer.
Angelina Fernandez
Director (Communications)
Monetary Authority of Singapore