BCP Ch 2: Insurance Regulation and Premium Payment Framework in Singapore

Role of the Regulator in Singapore

• The Monetary Authority of Singapore (MAS) regulates the insurance industry.

• The Insurance Department, under the Financial Supervision Group of the MAS, supervises and regulates insurance companies with the primary objective of protecting policyholders' interests.

• The Insurance Act 1966 governs the regulation of insurance business in Singapore.

Legal Instruments Adopted by MAS

• Acts: Statutory laws passed by Parliament (e.g., Insurance Act 1966, Financial Advisers Act 2001, Deposit Insurance and Policy Owners' Protection Schemes Act 2011).

• Subsidiary Legislation: Issued under the authority of the relevant Acts, providing greater detail of the provisions of an Act (e.g., Insurance (Intermediaries) Regulations).

• Directions: Specific instructions to financial institutions or other specified persons to ensure compliance.

  • Directives: Legally binding requirements on an individual financial institution or a specified person.

  • Notices: Legally binding requirements on a specified class of financial institutions or persons (e.g., MAS 211, MAS 106, Notice 502).

• Guidelines: Principles or “best practice standards” that govern the conduct of specified institutions or persons (e.g., Technology Risk Management Guidelines for Financial Institutions, MAS Guidelines on Environmental Risk Management for Insurers).

• Practice Notes: Guide specified institutions or persons on administrative procedures (e.g., Practice Note on Recommendations on Investment Products [FAA PN-02]).

• Circulars: Documents for information or are published on the MAS Website for public information (e.g., ID 07/20, New MAS Notice 133).

• Policy Statements: Outline broadly the major policies of the MAS.

Licensing

• Insurers in Singapore include licensed insurers, authorised reinsurers, approved marine, aviation and transit (MAT) insurers and foreign insurers.

• Insurance brokers in Singapore include registered insurance brokers, approved MAT insurance brokers and approved reinsurance brokers.

• Licensing is governed under the Insurance Act 1966.

Risk Based Capital Framework

• MAS adopted a risk-based capital (RBC) framework in 2004.

• The objectives of RBC2 are to enhance policyholder protection, observe international standards and best practices and to ensure insurers can perform its economic and social role on a sustainable basis

• The Insurance (Valuation and Capital) (Amendment) Regulations 2020 and MAS Notice 133 came into effect on March 31, 2020.

Nomination of Beneficiaries

• Insurance (Nomination of Beneficiaries) Regulations 2009 gives policy owners two options when nominating beneficiaries: revocable nomination or trust nomination.

• Revocable Nomination: Policy owner retains full ownership and can change beneficiaries at any time.

• Trust Nomination: Policy owner relinquishes all rights to the policy; only a spouse or child can be a beneficiary.

Policy Owners’ Protection Scheme

• The Policy Owners’ Protection Scheme was created by the Deposit Insurance and Policy Owner’ Protection Act 2011.

• The scheme provides 100% coverage for general insurance policies covered under the scheme.

• All compulsory insurance policies under the Motor Vehicles (Third-Party Risks and Compensation) Act 1960 and Work Injury Compensation Act 2019.

• All insurers registered by the MAS that carry out direct general business (other than captive or specialist insurers) are PPF Scheme Members.

Premium Payment Framework

• The Premium Payment Framework is a code, jointly issued by the General Insurance Association of Singapore (GIA) and the Singapore Insurance Brokers Association (SIBA), that came into effect on 1 September 2016.

• Three types of premium payment warranties are incorporated into policies:

  • Payment Before Cover Warranty: Applies to Personal Lines policies or Bonds. Policy is not in force unless premium is paid on or before inception.

  • Premium Payment Warranty: Applies to ALL classes of general insurance relating to commercial lines. Premium must be paid within 60 days of inception if the period of insurance is more than 60 days.

  • Premium Instalment Payment Warranty: Applies to commercial lines business. The first instalment must be paid within 60 days from the commencement of the policy.

• Re-marketing After Cancellation Due To Breach Of Premium Payment Warranty: policies applied for have not been in whole or in part terminated by another insurer due to non-payment of premiums in the last 12 months.

• Suspension And/Or Reinstatement Of Cover If Payment After Breach: insurers will suspend cover from the date of breach to the date of payment.