Speeches
 Published Date: 17 March 2000

Monetary Authority of Singapore (MAS) Announces Programme to Liberalise the Singapore Insurance Industry

Date: 17 Mar 2000

The key features of the liberalisation programme are summarised as follows:

Affected Group Policy Change
LIBERALISATION OF MARKET ENTRY
1. Direct Insurers Closed-door policy on direct insurers will be lifted with immediate effect. The admission of new entrants will be subject to insurers meeting the following criteria:

  • Domestic and international rankings

  • Present and past credit ratings

  • Track record and reputation

  • Commitment to contribute to Singapore's financial sector development

Applicants with strong record in product innovation and the use of alternative distribution channels, or in specialist and niche fields, will receive favourable consideration.

There will not be any fixed limit on the number of new entrants, but admission will be paced out to minimise the risk of unsound, short-term market practices.
2. Independent Intermediaries Open admission policy for new insurance brokers. New insurance brokers to be admitted based on :

  • World rankings (for general insurance brokers)

  • Reputation, financial standing and track record

  • Business plans and projections

    Commitment and ability to contribute towards Singapore's financial sector development.
3. Reinsurers and Captives Existing open policy on admission to remain unchanged.
4. Local Direct Insurers Existing 49% foreign shareholding limit in locally owned direct insurers will be lifted with immediate effect.

Existing requirement for any increase in shareholdings (local or foreign) in a locally incorporated insurer to 5% or 20% to be approved by MAS remains unchanged.

MAS hopes that the liberalisation will be a sufficient catalyst to prompt consolidation. It encourages local insurers to merge or form strategic alliances with other financial industry players, in order to flourish in a liberalised environment. Consolidation will lead to greater economies of scale, facilitate IT investments, acquisitions and strategic alliances, and help attract talent to the industry.
ENHANCING THE PROTECTION OF POLICYHOLDERS' INTERESTS BY INSURERS

Along with the liberalisation programme, MAS will introduce measures to raise standards of corporate governance and market conduct, and strengthen protection of policyholders' interests by insurers.
1. CORPORATE GOVERNANCE AND THE ROLE OF KEY PERSONS
a Locally-incorporated insurers

  • To have a majority of independent and non-executive directors on their boards.

  • Majority of directors to be Singapore residents.

  • Re-appointments of directors to require MAS' approval.
b. Direct life insurance companies MAS will work in consultation with the industry to set guidelines that clearly enunciate the role and functions of directors and Appointed Actuaries of direct life insurance companies.
2. ACTUARIAL CERTIFICATION OF GENERAL INSURANCE RESERVES
General Insurers To ensure good discipline and sound management practice, MAS will require the loss reserves of general insurers to be assessed and certified by qualified professionals within the next 2 years. Details will be worked out in consultation with the industry.
3. ENHANCING THE EFFICIENCY OF DISTRIBUTION OF LIFE INSURANCE PRODUCTS
All life insurers MAS intends to raise the level of disclosure to the standards of international best practice.

Life insurers will be required to disclose their expenses and show how expenses affect yields. The details are being worked out in consultation with the joint committee detailed below.

MAS has formed a committee comprising leading industry representatives and MAS officials, to study and recommend changes to improve the efficiency, transparency and quality of distribution of insurance products. It will be chaired by Mr Law Song Keng, CEO of Overseas Assurance Corporation Ltd.