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How are the interests of life insurance policy holders safeguarded in Singapore?

The Monetary Authority of Singapore (MAS) is the central bank of Singapore. It administers the Insurance Act (Cap 142) which governs the regulation of insurers, reinsurers, insurance intermediaries (agents and brokers) in Singapore. Insurers and reinsurers with an establishment in Singapore must be „licensed‟.

Useful link on protection of life insurance policy holder (http://www.mas.gov.sg/news-and-publications/letters-to-editor/2008/response-to-do-more-toprotect-policy-holders.aspx)

1 Separate Insurance Fund All insurers are required by MAS to provide a separate insurance fund for each class of business that is related to Singapore policies and each class of insurance business carried offshore (Refer to Fig. 1). The assets of the fund can only be used to meet the fund expenses and liabilities A life insurer shall have separate funds for investment-linked and non-investment linked policies and for participating and non-participating policies. 2 Capital Adequacy Requirement Currently, under the Insurance Regulations, insurers have to maintain a minimum Capital Adequacy Ratio (“CAR”) of 100%. Every must maintain capital adequacy of at least 120% of the required total safety margin If less, they are required to notify MAS of any event that would result in the financial resources of the insurer being less than 120%. (Refer to Fig.2). Also, under the insurance act, each insurance fund's assets must always exceed its liabilities in addition to a safety margin imposed by MAS (Refer to Fig. 3) This ensures that in the event of losses, the insurer company has sufficient fund to meet the losses and absorb losses in the event of a winding-up 3 Maintenance of the life fund For insurance fund maintained by a direct insurer licensed to carry on life business which comprises wholly or partly of participating policies , there must be a surplus account, established and maintained in such manner as MAS may prescribe or specify, as part of the insurance fund. With a surplus account, it can be used in emergency or to meet fund liabilities. This prevents the collapse of insurers company like what happened to AIG (America in 2008) which needed the government to bail them out.

4) PPF will compensate policy holders if the insurance company were to collapse. to all insured for compulsory general insurance policies and also to individuals with Singapore policies of specified personal lines policies.1% of the sum insured at risk for policies whose original term is two years or less and 0. as at the end of the preceding accounting period. The Insurance Act accords priority to the claims of policy owners. 6 Operations Ceased If an insurer ceases operations. Reinsurer/ Captive Insurer Assets must not less than the amount of the fund liabilities. It can be regarded as similar to capital adequacy requirements. As a company an insurer shall maintain a margin of solvency in respect of the company as a whole. ahead of other unsecured creditors. as at the end of the preceding accounting period It also cannot be less than 0. (Refer to Fig. 5) .2% of the sum insured at risk for policies whose original term is more than two years. The scheme provides 100 % coverage without any limit to individuals for guaranteed benefits of life insurance policies. Section 17 of the Insurance Act provides that Insurers are required to maintain enhanced margins of solvency. over the assets of the insurer and its insurance funds. Insurer shall maintain the required margins of solvency at all times during any accounting period. This acts as an insurance against failure of a life or general insurer. 5 Policy Owner Protection Fund The Insurance Act set up a Policy Owner's Protection Fund ("PPF") to compensate policy owners. its assets will be used to compensate policy owners. For the life business: 4. It is administered by the Singapore Deposit Insurance Corporation.4 Fund Solvency Margin (Refer to Link 1) The solvency margin is a minimum excess of insurer‟s assets over its liabilities set by regulators. (Refer to Fig. The aggregate margin maintained in respect of Singapore policies shall not be less than $5 million.1 Direct insurer The amount must not be less than the sum of 3% of the non-participating policy reserves and 2% of the participating policy reserves.

Appendix [Figures] Fig.5 .3 Fig.1 Fig.2 Fig.4 Fig.

pdf .gov.Appendix [Links] No.sg/~/media/resource/legislation_guidelines/insurance/notices/MA 1 S%20102%20Margins%20of%20Solvency_23%20May%201998_Cancelled.mas. Links http://www.