"The Insurance (Amendment) Bill 2013" - Second Reading Speech by Mr Tharman Shanmugaratnam, Deputy Prime Minister, Minister in charge of MAS
1 Mdm Speaker, I beg to move that the Bill be now read a second time.
2 This Bill amends the Insurance Act (Cap. 142) to enhance the Monetary Authority of Singapore’s (MAS) powers to better achieve its supervisory objectives, improve the clarity of its policy intent, align the provisions with other Acts administered by MAS, and update some provisions that are outdated.
3 MAS has conducted several public consultations on the policy positions implied by the amendments, as well as on the draft Bill. As with the other two Bills that Parliament has just considered, MAS has studied all the feedback received and taken them into account in the Bill where appropriate.
4 Mdm Speaker, I will now go through the main amendments in the Bill.
Enhancing MAS’ Supervisory Powers
5 First, the Bill will enhance MAS’ supervisory powers in a number of areas. For example, the Insurance Act currently empowers MAS to issue directions to an insurer to maintain assets in Singapore only when there are grounds for MAS to cancel the licence of the insurer, such as when the insurer is insolvent or has ceased to carry on business. There may, however, be situations where MAS will need to take pre-emptive action to direct an insurer to maintain assets in Singapore to safeguard the interest of policy owners. The Bill therefore empowers MAS to impose asset maintenance requirements on an insurer without requiring grounds for MAS to cancel its licence.
6 The Bill will also provide MAS with the power to impose conditions on an insurer before cancelling the insurer’s licence. For example, an insurer may be required to submit proof that its insurance liabilities have been fully discharged, to ensure that the rights of policy owners are not adversely affected.
7 In addition, the Bill will provide for MAS to direct an insurer to remove key persons including the Chairman and Chief Executive from office or from employment in certain circumstances, for example, where the management or governance of an insurer is being carried out in a way that is detrimental to policy owners.
8 The global financial crisis highlighted the importance of effective supervision of insurers with cross-border operations, and for supervisory cooperation among insurance regulators. The Bill will equip MAS with powers to inspect the overseas branches and subsidiaries of Singapore-incorporated insurers. The Bill will also permit MAS to furnish supervisory information such as inspection reports to foreign regulators and insurers’ head offices, subject to confidentiality requirements, and allow foreign regulators to inspect their insurers operating in Singapore with MAS’ approval.
Clarifying MAS’ Policy Intent
9 Second, the Bill will clarify MAS’ policy intent on various issues. For example, with changes in insurance business models, the existing definition of “carrying on insurance business” in the Insurance Act potentially captures administrative operations outsourced by insurers to third parties which MAS does not need to regulate. These third parties include service providers which collect insurance premiums on behalf of an insurer. The revised definition will provide clarity on the entities and activities that are meant to be regulated.
10 The Bill also proposes to introduce a definition for “solicitation” of insurance business to give clarity on what is prohibited. It makes clear that solicitation of insurance business by unlicensed insurers, including the overseas head office or branches of an insurer that is licensed in Singapore, is prohibited. In addition, a licensed insurer is not allowed to co-brand its insurance products and services in Singapore with an insurer that is not licensed by MAS.
Aligning the Provisions of the Insurance Act in Common Areas with Other Acts Administered by MAS
11 Third, the Bill will align some provisions in the Insurance Act with other Acts administered by MAS to ensure consistency, where appropriate, in its regulation of the financial sector in Singapore. For example, the Bill will introduce an appeal process for applicants whose application for licensing, registration or authorisation has been rejected by MAS.
12 The Bill will also align a number of penalty provisions for offences in the Insurance Act with those of equivalent offences in the Banking Act. This will increase the penalties for many of the offences in the Insurance Act.
13 Another alignment with the Banking Act relates to the ownership and control of Singapore-incorporated insurers. The Bill will allow MAS to apply its “fit and proper” criteria in approving substantial shareholders and controllers of a Singapore-incorporated insurer, to attach conditions to such approvals and to remove existing substantial shareholders and controllers when they are no longer deemed fit and proper.
Removing or Updating Obsolete Provisions
14 Last, the Bill will remove or refine certain provisions of the Insurance Act. For instance, the Bill reflects that it is not the policy intent to require all life insurance policies that have been in-force for three years or more to have a cash surrender value. This is because insurers can offer low cost insurance products which provide only protection coverage, with no savings element. Such products, like term life insurance products, do not have cash surrender values.
15 Mdm Speaker, let me conclude. The amendments in this Bill will enhance our current insurance regulatory regime, allowing us to keep pace with regulatory developments internationally and market developments in the insurance industry. MAS will continue to review its regulations and policies to ensure adequate protection of insurance policy owners and to ensure broader financial stability.
16 Mdm, I beg to move.