MAS Invites Comments On Policy Owners’ Protection Fund Schemes and Insurance Resolution
Singapore, 23 December 2009 - The Monetary Authority of Singapore (MAS) announced today that it is reviewing two sets of measures to strengthen the protection of insurance policy owners. The first set of measures relates to the Policy Owners’ Protection Fund (PPF), which will be funded by the industry to compensate policy owners in the event of the default of an insurer. The second set of measures seeks to enhance MAS’ powers relating to the resolution of insurers in Singapore.
2 The PPF, by providing compensation to policy owners in the event of the default of a registered insurer, helps to alleviate the loss of insurance coverage to individual policy owners, limit the potential disruption to the society and economy, and enhance public confidence in the insurance sector.
3 The Insurance Act provides for separate PPF schemes for life and general insurance to compensate policy owners of life policies and compulsory insurance policies1, respectively. MAS had earlier commenced a review of the existing PPF schemes to ensure that they keep pace with industry and regulatory developments. We issued a consultation paper in December 2005 on the first phase of the PPF review which covered issues relating to the membership, scope and level of coverage, continuity of coverage, funding and size of levies. Among others, it was proposed then that the PPF will provide compensation of up to $500,000 for sum assured and $100,000 for surrender value of policies covered under the PPF life insurance scheme. Feedback received on this consultation was positive.
4 The second consultation paper issued today revisits some of the issues covered in the first consultation paper to take into account developments since then. Among the issues reviewed, MAS is proposing to provide for 100% coverage of protected liabilities of all life, and accident and health policies under the PPF life insurance scheme2. This will allow for better protection to policy owners. Similarly, for consistency, MAS is proposing to cover 100% of liabilities of all protected lines under the PPF general insurance scheme. The second consultation paper also sets out proposals relating to the implementation details of the PPF schemes which include governance and administration of the schemes, management of the PPF funds, collection of levies, payouts using PPF funds and priority ranking of liabilities.
5 In conjunction with the review of the PPF schemes, MAS also intends to enhance our powers relating to the resolution of insurers. This will strengthen MAS’ ability to secure continuity in insurance coverage, particularly for life policies. Continuity in coverage is important because policies written by life insurers tend to be long-term in nature, and early termination of the policies could cause a substantial loss to the policy owner due to a low surrender value or inability to take up new insurance cover.
6 As the proposed powers have some impact on the application of the Companies Act, MAS is concurrently consulting with other Government agencies on these proposed powers.
7 MAS invites comments on the two consultation papers which can be found on the MAS website: (Click to view the consultation paper on PPF schemes); (Click (526.8 KB) to view the consultation paper on Insurance Resolution). Interested parties should forward their comments on the proposals in the consultation papers by 29 January 2010. (125.5 KB)
1 “Compulsory insurance policies” is defined in the Insurance Act as any policy or security which satisfies the requirements of the Motor Vehicles (Third Party Risks and Compensation) Act (Cap 189) or the Work Injury Compensation Act (Cap 354).
2 Section 46 of the Insurance Act currently protects 90% of an insurer’s liability on any life policy in the event of default of the insurer.