MAS slaps new compensation and coverage laws on insurers
The Monetary Authority of Singapore 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.
The PPF provides compensation to policy owners in the event of the default of a registered insurer which will help to alleviate the loss of insurance coverage to individual policy owners, limit the potential disruption to the society and economy and ultimately enhance public confidence in the insurance sector.
The Insurance Act provides for separate PPF schemes for life and general insurance to compensate policy owners of life policies and compulsory insurance policies, respectively. MAS had earlier commenced a review of the existing PPF schemes to ensure that they keep pace with industry and regulatory developments. A consultation paper was issued in December 2005 on the first phase of the PPF review covering 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. According to MAS, feedback received on this consultation was positive.
The second consultation paper, which was 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 scheme. For consistency, MAS is also 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.
MAS also has intentions to enhance its own powers relating to the resolution of insurers. This will allow MAS’ greater ability to secure continuity in insurance coverage, particularly for life policies. Most 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.
MAS is currently consulting with other government agencies on these new proposed powers.
Comments are also invited on the two consultation papers, which can be found on the MAS website.
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