Insurance and Reinsurance in Singapore: overview

A Q&A guide to insurance and reinsurance in Singapore.

The Q&A gives a high level overview of the market trends and regulatory framework in the insurance and reinsurance market; the regulation of insurance and reinsurance contracts; the corporate structure of insurers and reinsurers; and the regulation of insurers and reinsurers, including regulation of the transfer of risk. It also covers: operating restrictions for insurance and reinsurance entities, including authorisation/licensing requirements; reinsurance monitoring and disclosure requirements; content requirements for policies and implied terms; insurance and reinsurance claims; insolvency of insurance and reinsurance providers; taxation; dispute resolution; and proposals for reform. Finally, it provides websites and brief details for the main insurance/reinsurance trade organisations in Singapore.

To compare answers across multiple jurisdictions visit the Insurance and Reinsurance Country Q&A tool.

This Q&A is part of the global guide to insurance and reinsurance. For a full list of jurisdictional Q&As visit www.practicallaw.com/insurance-guide.

Contents

Market trends and regulatory framework

1. What were the main trends in the insurance and reinsurance markets over the last 12 months?

Insurance

The Singapore insurance market remains very competitive. As of the end of 2013, the market had:

  • Gross premiums total receipt of about over S$3.7 billion.

  • A total asset worth of about S$10 billion.

Statistics collected over the four-year period between 2010 and 2013 indicate a growing market. Total gross premiums for active policies in Singapore and retention ratios have increased year on year, indicating good growth prospects for the market as a whole. In particular, the Singaporean non-life insurance sector registered a compound annual growth rate of 10.4% from 2009 to 2013 in respect of gross written premiums.

Statistics also indicate that the market for offshore policies has recovered since 2011, when insurers incurred a loss ratio of 241.7% and made a loss of S$6.5 billion in underwriting results. Since 2011, statistics show that the offshore insurance market has maintained its retention ratio at about 60% and increased its total assets up to S$17 billion.

The Asia Market Insurance Report 2015, published by Marsh Risk Management Research, notes that Asia remains an insurance buyers' market despite declining rates in most lines of coverage due to the instability resulting from political and social reforms.

Reinsurance

The Singapore reinsurance market also appears to be extremely competitive. Premium rates for reinsurance policies have decreased, allowing more insurers to manage their risks at a lower price. Consequently, the number of insurers seeking to improve their risk management and minimise the negative impacts of large risks has increased over the last 12 months, resulting in a higher number of claims made by insurers to reinsurers. This has generally resulted in lower gross profits and higher losses in the reinsurance market. The state of the reinsurance market therefore stands in contrast with that of the insurance market, which has experienced growth and increase in annual profits in the previous years.

 
2. What is the regulatory framework for insurance/reinsurance activities?

Regulatory framework

The Insurance Act (Cap 142) governs insurance and reinsurance activities in Singapore.

Regulatory bodies

Insurance and reinsurance activities are regulated by the Monetary Authority of Singapore (MAS), established by the Monetary Authority of Singapore Act (Cap 186).

MAS is responsible for the licensing, authorisation and supervision of insurance and reinsurance activities. MAS derives its regulatory and enforcement powers from the Insurance Act (Cap 142). The Act also empowers MAS to issue periodic circulars, directions and guidelines, and ensure compliance with those.

 

Regulation of insurance and reinsurance contracts

3. What is a contract of insurance for the purposes of the law and regulation? How does it differ from a contract of reinsurance?

Contract of insurance

There is no statutory definition of a contract of insurance under Singapore law. Under the common law, which applies in Singapore, a contract of insurance is essentially a contract under which an insurer agrees to indemnify an insured against the occurrence of a specified event for a premium. The insured can either be a consumer or a commercial company, while the insurer is always a company carrying out the business of insurance. A contract of insurance must include the three following features:

  • On the occurrence of an event, the insured must become entitled to a specified benefit (for example, damages or partial indemnity for monetary losses sustained).

  • The event must involve an element of uncertainty.

  • The insured must have an insurable interest. An insurable interest is the insured's pecuniary interest that is the subject matter of the policy and is required for the contract of insurance to be enforceable. The types of insurable interests differ depending to the type of insurance.

Contract of reinsurance

A contract of reinsurance is a specific form of insurance contract under which an insurer (reinsurer) agrees to insure another insurer (cedant) for a loss that may be borne as a result of a policy claim made by an insured. It differs from a contract of insurance in that the parties to a contract of reinsurance are both commercial insurers with knowledge of the insurance market. Reinsurance contracts are therefore usually less regulated than insurance contracts.

 
4. Are all contracts of insurance/reinsurance regulated?

Contracts of insurance and reinsurance are governed by:

  • The Insurance Act (Cap 142).

  • The Marine Insurance Act (Cap 387).

  • The Motor Vehicle (Third Party Risks and Compensation) Act (Cap 189).

  • The Work Injury Compensation Act (Cap 354).

These statutes impose particular requirements on certain types of insurance policies (including life, marine insurance, motor vehicles and workplace compensation policies) and further regulate claims and payments under such policies.

Where the insured is a consumer, a contract of insurance may also be subject to the provisions of the Consumer Protection (Fair Trading) Act (Cap 52A) (see Question 21).

In the absence of express statutory provisions, insurance and reinsurance contracts are governed by both:

  • English common law, through the Application of English Law Act 1996.

  • Singapore case law.

 

Corporate structure

5. What form of corporate organisation can insurers take?

An insurer can take the form of either a:

  • Company limited by shares. A company limited by shares is a company in which the liability of members is limited to the amount unpaid (if any) on the shares respectively held by them. The company can issue shares to its shareholders who can elect directors to run the company. An insurance company limited by shares is governed by the Companies Act (Cap 50) and the Insurance Act. This is the preferred form of corporate organisation for insurers.

  • Mutual company. A mutual company is a company that is entirely owned by its policy holders and does not issue shares. Mutual companies are governed by the Insurance Act.

 

Regulation of insurers and reinsurers

6. Are all insurers and reinsurers regulated? Are they all regulated in the same way?

All insurers and reinsurers are regulated by the Insurance Act and the Monetary Authority of Singapore (MAS) regulations, but in different ways and through different mechanisms depending on the type of insurance.

Different types of insurers are also subject to different rules, as follows:

  • Licensed insurers can carry on business in direct life and/or general insurance/reinsurance, or captive insurance. Each type of licensed insurer is subject to different regulatory requirements in relation to fund solvency and taxation (among others), depending on the type of insurance.

  • Foreign insurers and foreign companies carrying on insurance business under a foreign insurer scheme can only carry on business in particular classes of insurance as determined by MAS, and must be duly licensed in their home country. There is currently only one foreign insurer scheme in Singapore: the Lloyd's Asia Scheme.

  • Approved Marine, Aviation and Transit (MAT) insurers can operate in Singapore if they are approved under the Insurance (Approved Marine, Aviation and Transit Insurers) Regulations 2003. MAT insurers do not have a physical presence in Singapore and do not carry on insurance business other than the collection or receipt of premiums in relation to MAT.

Authorised reinsurers can carry on reinsurance business as general or life reinsurers and provide policies to persons in Singapore. Authorised reinsurers do not have a physical presence in Singapore and are subject to differing regulatory requirements from licensed insurers in respect of fund solvency and management of assets, among others.

See also Questions 9 and 10.

 
7. Can insurers and reinsurers carry on non-insurance business? Are there any restrictions on their business activities?

Insurers and reinsurers incorporated in Singapore are restricted from holding major stakes in any corporation without prior approval from the Monetary Authority of Singapore (MAS) (Insurance Act). A major stake is defined as any beneficial interest or control exceeding 10% of the corporation's voting rights or issued shares. An interest in a corporation where the directors are under an obligation to act in accordance with the instructions of a licensed insurer or authorised reinsurer is also deemed a major stake. Foreign insurers can hold a major stake in a corporation without approval, although they will require approval if they wish to hold such stakes through using assets of an insurance fund, or as assets of an insurance fund.

Insurers are also limited in the type of insurance they can carry on under the terms of their licence. There are two classes of licences:

  • Licences for life insurance business, which include life policies, long-term accident and health policies.

  • Licences for general insurance business, which include all types of insurance business except life policies.

Generally, insurers can only carry on insurance business within the class they are licensed for. Insurers holding a life business licence are not subject to this rule and are allowed to offer short-term accident and health policies without being licensed for general insurance business.

There are no restrictions on the type of reinsurance policies that reinsurers can offer.

 
8. Are there any statutory limits or other restrictions on, or requirements relating to, the transfer of risk by insurance or reinsurance companies?

There are no statutory limits relating to the transfer of risk by insurance or reinsurance companies. Insurers and reinsurers can, if they wish, transfer 100% of their risk provided that they comply with the provisions of the Insurance Act and the Monetary Authority of Singapore regulations.

Authorisation or licensing

9. Does the entity or person have to be authorised or licensed?

Insurance/reinsurance providers

A person or entity purporting to carry on insurance business as an insurer or reinsurer must be duly licensed (Insurance Act). A person or entity incorporated in a foreign country can only carry on in insurance business if it operates under a foreign insurer scheme.

An entity that wishes to carry on an insurance business as an insurer/reinsurer must apply in writing to the Monetary Authority of Singapore (MAS). MAS will not grant a licence unless the applicant takes one of the following forms:

  • A company incorporated in Singapore.

  • A company incorporated outside Singapore with an established place of business in Singapore.

  • A co-operative society.

The entity must also satisfy such financial requirements that MAS may prescribe as it thinks fit.

Insurance/reinsurance intermediaries

Under the Insurance Act and Insurance Intermediaries Act (Cap 142A), an insurance agent (except a licensed financial adviser or a representative of such agent) cannot hold himself out to be an agent of a licensed insurer unless a written agreement between the insurer and the agent authorises the intermediary to arrange, as an agent of the insurer, any contract or contract of insurance.

Insurance brokers are subject to the same provisions and must be registered with MAS to carry on business as insurance brokers.

Other providers of insurance/reinsurance-related activities

Any person who wishes to establish and operate a representative office in Singapore must register such office with MAS (Insurance Act). A representative office is defined as an office established in Singapore by a person that intends to carry on insurance business in Singapore, which is not an authorised reinsurer and which does not carry on businesses of any kind (insurance or other) in Singapore.

 
10. What are the main exemptions or exclusions from authorisation or licensing?

Insurance/reinsurance providers

A company cannot carry on the following activities in Singapore if it does not hold the requisite licence issued by the Monetary Authority of Singapore (MAS):

  • Assuming risk or liability under policies.

  • Receiving proposals for policies.

  • Issuing policies.

  • Collecting premiums.

Insurance/reinsurance intermediaries

An insurance agent can operate without written authorisation if he is a:

  • Licensed financial adviser.

  • Person exempt from holding a financial adviser's licence (other than a licensed insurer) in respect of any financial advisory service under specific provisions of the Financial Advisers Act (Cap. 110).

  • Representative of a person as specified in the Insurance Act.

The following entities can operate as insurance broker without registration:

  • Banks under the Banking Act (Cap 19).

  • Merchant banks approved as financial institutions and approved to carry on business as insurance brokers under the Monetary Authority of Singapore Act (Cap. 186).

  • Licensed financial advisers under the Financial Advisers Act (Cap. 110).

  • Holders of a capital markets services licence under the Securities and Futures Act (Cap. 289).

  • Finance companies that have been granted an exemption to carry on business as insurance broker under the Finance Companies Act (Cap. 108).

  • Direct insurers licensed to carry on life business.

  • Other persons or classes of persons as may be specified, and subject to any conditions imposed by MAS.

Other providers of insurance/reinsurance-related activities

There are no exemptions or exclusions from registration.

Restrictions on ownership or control

11. Are there any restrictions on the ownership or control of insurance-related entities?

Insurance/reinsurance providers

The Insurance Act provides that ownership or control of an insurer must be held by a fit and proper person. In determining whether a person is fit or proper, the Monetary Authority of Singapore (MAS) will consider the reputation of the person wishing to acquire ownership or control of an insurer, and whether the relevant licensed insurer will continue to conduct its business prudently and comply with the provisions of the Insurance Act (see Question 12, Insurance/reinsurance providers).

There are no other restrictions on the ownership or control of insurance-related entities.

Insurance/reinsurance intermediaries

There are no restrictions on ownership or control of insurance/reinsurance intermediaries.

Other providers of insurance/reinsurance-related activities

There are no ownership or control restrictions.

 
12. Must owners or controllers be approved by or notified to the relevant authorities before taking, increasing or reducing their control or ownership of the entity?

Insurance/reinsurance providers

A person must obtain prior approval of the Monetary Authority of Singapore (MAS) if it wishes to:

  • Own or control more than 20% of the shareholding of an insurance company.

  • Obtain a shareholding of 5% or more of an insurance company.

  • Enter into an agreement with another person to act in concert in respect of 5% or more of the shareholding of an insurance company.

An insurer or reinsurer that wishes to appoint a person as a "key executive person" must also obtain the approval of MAS. A key executive person is defined as a person employed in any of the following positions:

  • Chief executive.

  • Deputy chief executive.

  • Appointed actuary.

  • Certified actuary.

MAS may revoke an entity's licence to carry on insurance business at the request of another insurer if it is:

  • Dissatisfied with the financial standing of an insurer or reinsurer after a change of control.

  • Concerned that the new person in control is not a fit and proper person.

Insurance/reinsurance intermediaries

A person that wishes to enter into an agreement to gain effective control of an insurance broker must obtain prior approval from MAS. A person is regarded as obtaining effective control of an insurance broker if he acquires or controls, directly or indirectly, more than 20% of the broker's issued share capital or voting rights.

Prior approval of MAS must also be obtained if an insurance broker wishes to appoint a person as its chief executive officer or director.

Other providers of insurance/reinsurance-related activities

There are no pre-approval or notification requirements.

Ongoing requirements for the authorised or licensed entity

13. What are the key ongoing requirements with which the authorised or licensed entity must comply?

Insurance/reinsurance providers

Licensed insurers and authorised reinsurers must pay an annual fee to the Monetary Authority of Singapore (MAS). This fee varies depending on the class of insurance/reinsurance business carried on by the insurer/reinsurer. Licensed insurers and authorised reinsurers must also comply with the provisions of the Deposit Insurance and Policy Owners' Protection Schemes Act (Cap. 77B).

Notable requirements that require strict compliance include:

  • Establishing and maintaining a register of Singapore and offshore policies, if the insurer carries on business relating to Singapore and offshore policies.

  • Establishing and maintaining a separate insurance fund for each class of insurance business carried on by the insurer in respect of its Singapore and offshore policies.

  • Complying with fund solvency and capital adequacy requirements under relevant legislation and MAS directions.

  • Investing and maintaining the assets of any insurance fund in accordance with MAS directions, and ensure the maintenance of assets in a way deemed appropriate by MAS.

  • Investigating the financial condition of each class of business carried on for every accounting period, and ensuring that such investigation is duly carried out by an actuary appointed with the approval of MAS.

Insurance/reinsurance intermediaries

A licensed broker must prepare and keep statements of accounts, books and other documents that can sufficiently explain the transactions and financial position of the broker and lodge those with MAS. The broker is also under a statutory obligation to appoint an auditor to audit its accounts for each financial year.

Other providers of insurance/reinsurance-related activities

There are no ongoing requirements.

Penalties for non-compliance with legal and regulatory requirements

14. What are the possible consequences of an entity failing to comply with applicable legal and regulatory requirements? What recourse do policyholders have if they have done business with a non-approved entity?

Insurance/reinsurance providers and intermediaries that fail to comply with particular requirements of the Insurance Act may be subject to a fine, imprisonment, or both.

The Monetary Authority of Singapore (MAS) can revoke the licence or authorisation of a provider or intermediary that fails to comply with:

  • Directions or circulars issued by MAS.

  • An obligation imposed by the Insurance Act.

  • A condition of its licence.

In addition, MAS can also inspect the books, accounts, records and other documents of an insurer or reinsurer. An insurer or reinsurer must produce such documents on request and provide such information and facilities as may be required by MAS to conduct an investigation. MAS may launch an investigation if it suspects that an entity contravenes any of its obligations under the Insurance Act.

A policyholder who buys an insurance product from an unlicensed insurer does not have any recourse except at common law. Such a contract will not be invalid for illegality but, depending on the specific circumstances, the policyholder may sue the unlicensed insurer for breach of statutory duty, misrepresentation and/or fraud. The policyholder may also lodge a complaint with MAS.

Restrictions on persons to whom services can be marketed or sold

15. Are there any restrictions on the persons to whom insurance/reinsurance services and contracts can be marketed or sold?

There are no restrictions on the persons to whom insurance/reinsurance services and contracts can be marketed or sold.

 

Reinsurance monitoring and disclosure requirements

16. To what extent can/must a reinsurance company monitor the claims, settlements and underwriting of the cedant company?

Whether a reinsurer can monitor the claims, settlements and underwriting of the cedant depends on the inclusion of an inspection clause in the reinsurance policy. Such clauses are usually included in reinsurance policies and typically grant the reinsurer the right to request for and inspect the books and records of the cedant.

Where there is no express inspection clause in the policy, a right of inspection may be implied into the policy, unless it has been specifically excluded. This was the position adopted by the UK courts in Phoenix General Insurance Co of Greece v Halvanon Insurance Co Limited [1985]2 Lloyds Rep 599, which found that a cedant had an implied duty to maintain all accounting claims and other documents, and to make such documents reasonably available to its reinsurer on request. However, this issue has not come before Singapore courts, and it remains unclear whether they will adopt such a position.

 
17. What disclosure/notification obligations does the cedant company have to the reinsurance company?

The precise scope of the disclosure obligations of a cedant depends on the specific wording of the inspection clause in the reinsurance policy. Where there is no inspection clause, the cedant may have an implied obligation to disclose books, policies and contracts that are relevant to the reinsurance contract. For more information, see Question 16.

 

Insurance and reinsurance policies

Content requirements and commonly found clauses

18. What are the main general form and content requirements for insurance policies? What are the most commonly found clauses?

Form and content requirements

Generally, the form and content of insurance policies are not heavily regulated. Such policies will be binding provided that the basic requirements of an insurance policy are met (for example, the risk insured must be insurable).

However, the following policies are subject to specific form and content requirements:

  • Life policies under the Insurance Act.

  • Marine insurance policies under the Marine Insurance Act.

  • Work injury policies under the Work Injury Compensation Act.

  • Motor vehicle insurance policies under the Motor Vehicles (Third Party Risks and Compensation) Act.

Commonly found clauses

Most insurers in Singapore have pre-underwritten policies for each type of insurance. These policies are regularly revised in accordance with the legal developments in contract and insurance law. They contain standard terms regarding the risk or subject matter insured, and the scope and monetary limits of the policy cover.

Insurance policies in Singapore typically contains the following terms:

  • Contractual details of the policy, including:

    • identification of the insured;

    • identification of the insurer;

    • premium payable; and

    • policy period.

  • Details on the subject matter insured, including a:

    • description of the subject matter; and

    • valuation of the subject matter.

  • Details of the scope of the cover, including the:

    • risks that are covered; and

    • limits of the cover.

  • Exclusions defining the limits of the cover.

  • Specific warranties given by the insured.

  • Amount of excess/deductible.

  • Procedure for filing a claim with the insurer, such as the:

    • mode or manner of giving notice to the insurer; and

    • time limits for giving notice.

 
19. Is facultative or treaty reinsurance more common? What are the most commonly found clauses in reinsurance policies?

Facultative/treaty reinsurance

Facultative and treaty reinsurance are equally common in Singapore. Whether a cedant opts for facultative or treaty reinsurance will depend on its profile and "appetite" for risk. A cedant that has the requisite reserve and is confident that it will be able to secure its risk may opt for facultative reinsurance. A conservative cedant with fewer financial capabilities may opt for treaty reinsurance.

Commonly found clauses

Commonly found clauses in reinsurance contracts include:

  • A clause excluding or limiting the scope of cover for particular categories of business "written as such" (that is, covering perils that are specifically referred to) or "unless incidental" (that is, covering perils incidental to the specific peril insured).

  • A claims-made clause limiting coverage to claims made during a certain period.

  • A losses-discovered clause limiting coverage to losses occurring during a certain period.

  • An aggregation of claims clause either limiting or allowing the aggregation of more than one claim arising from the risk insured.

  • An inspection clause entitling the reinsurer to request and inspect the cedant's books, accounts and contracts at a reasonable time, or a clause requiring the periodic submission of a report on the cedant's accounts or books (see Question 16).

  • A governing law and/or dispute resolution clause.

Implied terms

20. Are there any terms that are implied by law or regulation (even if not included in the insurance or reinsurance contract)?

Common law implies a duty of utmost good faith (uberrima fides) into all insurance and reinsurance contracts. For marine insurance contracts, such duty is imposed by statute (Marine Insurance Act). The duty requires both parties to act in good faith and with regard to the interests of the other party. It is particularly relevant where the policy requires the insured to provide information to the insurer in particular circumstances, and where an insurer exercises its right of subrogation and conducts the insured's defence against a third party.

The insured also has a duty to disclose all material facts and refrain from making untrue statements when negotiating the insurance contract. The insurer may otherwise be entitled to avoid the policy on the ground that it has been induced into entering the contract by the insured's failure to disclose material facts. The duty of disclosure is central to the ideal of fair dealing and has been consistently upheld by the courts, although the precise scope and application of the duty may differ depending on the type of insurance.

Customer protections

21. How do customer protections in the general law affect insurance contracts? What customer protections are generally included in insurance policies to supplement this?

General law

Under the Consumer Protection (Fair Trading) Act (Cap 52A), consumers can commence legal action against suppliers of services if the supplier has engaged in an unfair practice.

An unfair practice is defined as:

  • Doing or saying anything, or omitting to say anything, if it reasonably results in a consumer being deceived or misled.

  • Making a false claim.

  • Taking advantage of a consumer if the supplier knows or ought to know that the consumer is not in a position to protect its own interests, or is not reasonably able to understand the character, nature, language or effect of the transaction or any matter related to the transaction.

  • Other particular unfair practices specified in the Act.

Insurance policies

Insurance companies, as suppliers of financial services, are subject to the Consumer Protection (Fair Trading) Act. An insurance company that engages in unfair practices (see above, General law) may face legal action commenced by the consumer.

Alternatively, the Consumer Association of Singapore (CASE), a specified body under the Act, can require the insurance company to enter into a voluntary compliance agreement after investigating the matter and determining that the insurance company engaged in an unfair practice. Under such an agreement, the insurance company must undertake in writing to refrain from unfair practices and may also be required to compensate the consumer who suffered loss or damage as a result of the unfair practice, reimburse CASE for any expenses incurred and/or publicise the agreement.

Standard policies or terms

22. What are the main standard policies or terms produced by trade associations or relevant authorities?

There are generally no standard policies or terms produced by trade associations or relevant authorities, except for marine cargo policies which commonly incorporate the Institute Cargo Clauses or Institute Hull Clauses.

 

Insurance and reinsurance policy claims

Establishing an insurance claim

23. What must be established to trigger a claim under an insurance policy?

The insured can make a claim under the policy where a loss has occurred and falls within the scope of the policy cover.

When a loss occurs and damage is sustained, the insured must give notice of the claim and submit a claim form to the insurer within the specified time frame. Time limits vary depending on the policy. It is not uncommon for policies to require submission of the claim documents within a reasonable period instead of imposing a strict deadline. The insured must also provide the insurer with sufficient particulars of the loss suffered and prove that the loss is covered under the policy by submitting supporting documents. The submission of expert or survey reports is not mandatory but will assist the insurer in determining the relevant facts.

Most insurance policies require the insured to act as a "prudent uninsured" in the event of a loss, that is to adopt the course of action and conduct of a reasonable and prudent uninsured person. This includes giving notice of legal action to any third party or tortfeasor in accordance with a contract, or otherwise preserve the insurer's right of subrogation.

Third party insurance claims

24. What are the circumstances in which third parties can claim under an insurance policy?

Under the Motor Vehicle (Third-Party Risks and Compensation) Act, an insurer must comply with judgments made in favour of a third party following a motor vehicle accident. Where the insured has become bankrupt or has been wound up, its rights against the insurer are transferred to the third party if liability was incurred before the bankruptcy or winding up order.

A third party may also claim under the policy where the policy has been duly assigned to him in accordance with the Civil Law Act (Cap 43) (and/or the Marine Insurance Act for a marine insurance policy). Where the right of payment under a policy (for example, a life policy) has been assigned in accordance with the Civil Law Act, the assignee of the right to payment can also claim payment in place of the insured/assignor.

Under the Contracts (Rights of Third Parties) Act (Cap 53B), a third party can also claim under a policy if either:

  • The policy expressly enables him to do so.

  • The policy purports to confer a benefit on him and expressly names him, unless it appears from the contract that the parties did not intend the term to be enforceable by him.

This Act effectively allows a third party to bypass the doctrine of privity of contract in special circumstances and to make a claim under the insurance contract in his own name. However, the law on the rights of third parties to a contract is complex, and a third party may not necessarily be entitled to claim under the policy in the above circumstances. A comprehensive analysis of the Act and its corresponding case law will therefore be required.

Time limits

25. Is there a time limit outside of which the insured/cedant is barred from making a claim?

A claim under a contract of insurance/reinsurance must be brought within six years from the date on which the claim accrues (Limitation Act (Cap 163)).

An insured may also be barred from making a claim if he does not meet the deadline for giving notice or submitting claim documents under the policy (see Question 23).

Enforcement

26. Can the original policyholder or other third party enforce the reinsurance contract against a reinsurer?

Under the doctrine of privity of contract, an original policyholder or another third party to a reinsurance contract cannot enforce the contract against a reinsurer.

The Contracts (Rights of Third Parties) Act potentially applies to all reinsurance contracts where its requirements are satisfied (see Question 24). However, it is unlikely that the Act will apply in practice as most, if not all, reinsurance contracts typically contain a clause excluding the rights of third parties to enforce the contract.

Remedies

27. What remedies are available for breach of an insurance policy?

The remedies available depend on the type of breach.

Insurer

Where the insured has breached a condition of the policy, the legal consequences depend on the construction of the condition. Conditions in insurance policies are broadly classified into the following categories:

  • Conditions precedent, breach of which results in non-payment.

  • Suspensive conditions, breach of which results in a suspension of payment until the condition is corrected.

  • Minor conditions, breach of which do not prevent payment but for which the insured may be liable in damages.

As a general rule, all procedural requirements imposed by a policy are construed as conditions precedent. Therefore, where the insured breaches a procedural requirement of the policy (for example, failing to give notice of the claim within the specified time frame), the insurer may use the breach as a defence to the insured's claim.

The legal consequences are much more severe in the case of a breach of warranty. Warranties are broadly defined as promises that certain statements of fact are accurate and that they will remain accurate for the duration of the insurance cover. A warranty is a condition precedent to an insurer's liability and requires strict compliance, failing which there is no contract and the insurer is discharged from all liability from the date of the breach. The consequences of a breach of warranty are severe as the insurer's liability is discharged regardless of whether the breach has any bearing on the loss suffered, or whether it was remedied before the loss was occasioned.

Insured

The insured can commence an action against the insurer where the insurer breaches a term of the insurance contract. Depending on the nature of the term breached, the insured's remedies may include damages and specific performance. A common breach is the insurer's failing or wrongly refusing to pay the insured for a loss covered by the contract.

Punitive damage claims

28. Are punitive damages insurable? Can punitive damages be reinsured if they are covered by an underlying policy?

Singaporean courts have not expressly prohibited the insurance of punitive damages, and there do not appear to be any judicial objections to insuring such damages. Although a case on this issue has not come before the courts in Singapore, they may follow the position in the UK where courts have held that the insurance of punitive damages is not against public policy and is not prohibited per se (Lancashire County Council v Municipal Mutual Insurance Ltd [1996] EWCA Civ 1345).

 

Insolvency of insurance and reinsurance providers

29. What is the regulatory framework for dealing with distressed or insolvent insurance or reinsurance companies, or other persons or entities providing insurance or reinsurance related services? What regulatory and/or other protections exist for policyholders if the insurance company is insolvent?

The Monetary Authority of Singapore (MAS) can intervene in the business of an insurer or reinsurer that is likely to become insolvent or is unable to meet its obligations (Monetary Authority of Singapore Act). In particular, MAS has the power to (Insurance Act):

  • Remove any directors or person it considers unfit.

  • Recruit management personnel to manage the institution in accordance with sound insurance principles.

  • Recover such sums it considers to have been improperly paid.

  • Suspend any further issuance or renewals of insurance/reinsurance policies.

  • Appoint a statutory manager to manage the affairs of the insurer/reinsurer.

  • Request a winding up order from the High Court of Singapore.

Where an insurer is unable to meet its obligations or becomes insolvent, its liabilities must be distributed in the following order of priority (Insurance Act):

  • Any levy due and payable under the Deposit Insurance and Policy Owners' Protection Schemes Act 2011.

  • Protected liabilities under the Deposit Insurance and Policy Owners' Protection Schemes Act 2011, up to the amount paid or payable out of the Policy Owners' Protection Life Fund or Policy Owners' Protection General Fund by the deposit insurance and policy owners' protection fund agency.

  • Liabilities incurred in respect of direct policies that are not protected under the Deposit Insurance and Policy Owners' Protection Schemes Act 2011.

  • Liabilities incurred in respect of reinsurance policies.

 
30. Can excess insurance policies "drop down" to provide coverage if the primary insurer goes into insolvency?

There is no express prohibition against excess insurance policies "dropping down" to provide coverage if the primary insurer goes into insolvency, except where the insured warrants in the primary insurance policy not to seek policy coverage from an excess insurance provider in a "drop down" situation. While it is in theory possible for an excess insurance policy to "drop down", it is in practice rare for a provider to include such a provision in an excess insurance policy.

 
31. Is a right to set-off mutual debts and credits recognised in an insolvency proceeding involving an insurer or reinsurer?

Under section 88(1) of the Bankruptcy Act (Cap 20) (BA), all mutual credits, debts or dealings between a bankrupt and any creditor must be set-off against each other, and only the balance can be a debt provable in bankruptcy. This set-off (known as insolvency set-off) cannot be contracted out and is mandatory when there are mutual debts at the date of commencement of the winding-up. The debts that are provable in bankruptcy or winding up include any debt or liability to which the bankrupt (section 87(3), BA):

  • Is subject at the date of the bankruptcy order.

  • May become subject before his discharge by reason of any obligation incurred before the date of the bankruptcy order (including interest incurred before bankruptcy).

Pursuant to section 327(2) of the Companies Act (Cap 50), the provisions of the BA above that apply to persons made bankrupt will also apply to insolvent companies that have commenced the winding-up process.

 

Taxation of insurance and reinsurance providers

32. What is the tax treatment for insurers, reinsurers, and other persons or entities providing insurance and reinsurance-related services?

Under the Income Tax Act (Cap 134), all companies are generally taxed at the rate of 17% on their chargeable income. However, some insurers may be subject to different tax rates depending on the type of insurance business carried on.

Offshore general insurance/reinsurance business

An approved insurer carrying on offshore life insurance business and insuring/reinsuring offshore risks will be taxed at the rate of 10% on chargeable income for each year of assessment. Chargeable income refers to any of the following:

  • Income derived from insuring and reinsuring offshore risks.

  • Income derived from insurance funds established and maintained for offshore life policies.

  • Dividends and interest derived from outside Singapore, gains or profits realised from the sale of offshore investments, and interest from Asian Currency Unit (ACU) deposits derived from:

    • investments of an offshore insurance fund; and

    • investments of shareholders' funds to support the offshore insurance business.

Life insurance business

Insurers carrying on life insurance business are subject to a tax rate of 10% on life insurance surplus of any life insurance fund apportioned to policyholders for each year of assessment.

Marine hull and liability insurance/reinsurance business

Tax is payable at the rate of 5% on chargeable income derived by an approved marine hull and liability insurer for each year of assessment. Chargeable income of a marine hull and liability insurer is the income derived from the underwriting of marine hull and liability insurance. The precise amount of such income must be calculated in accordance with a prescribed formula provided in the Income Tax (Concessionary Rate of Tax for Approved Offshore Composite Insurers) Regulations.

Captive insurers

Captive insurers are exempt from tax on any underwriting income derived from insuring offshore risks.

 

Insurance and reinsurance dispute resolution

33. Are there special procedures or venues for dealing with insurance or reinsurance complaints or disputes?

A consumer who is not satisfied with his insurer can file a dispute with the Financial Industry Disputes Resolution Centre (FIDReC). The FIDReC is an independent organisation that offers services for the resolution of disputes between consumers and insurers in an amicable and inexpensive manner. The FIDReC dispute resolution process involves the two following stages:

  • Parties will first attempt to settle the matter via mediation.

  • If mediation is unsuccessful, the matter proceeds to a hearing heard by either a single FIDReC adjudicator or a panel of FIDReC adjudicators.

A consumer who is not satisfied with the outcome of the hearing can commence legal action against the insurer.

There are no special court procedures for dealing with commercial insurance or reinsurance disputes. Insurance or reinsurance disputes may be heard in the:

  • Magistrate's Court, for claims not exceeding S$60,000.

  • District Court, for claims exceeding S$60,000 but under S$250,000.

  • High Court. There is no minimum or maximum threshold to commence an action in the High Court. A party can commence an action in the High Court regardless of the quantum of his claim. However, parties will be subject to increased costs orders if the claim is commenced in the High Court instead of the Magistrate's Court or District Court.

An insured who wishes to bring a claim against an insurer can file a complaint with the General Insurance Association (GIA) or Life Insurance Association (LIA) if the insurer is a member of the GIA or LIA. Most (if not all) major insurance providers in Singapore are members of the GIA.

For more information on the GIA and LIA see box: Main insurance/reinsurance trade organisations.

 
34. Are arbitration clauses in insurance and reinsurance agreements enforceable?

Arbitration clauses in insurance and reinsurance agreements are enforceable. Where a contract contains an arbitration clause, the matter will be referred to arbitration and any corresponding court action will be stayed (Arbitration Act (Cap 10) and International Arbitration Act (Cap 143A)). Arbitration clauses that subject the arbitration to the rules of an arbitral institution, such as the Singapore International Arbitration Centre or Singapore Chamber of Maritime Arbitration, are also binding on the parties.

 
35. Are choice of forum, venue and applicable law clauses in an insurance or reinsurance contract recognised and enforced?

Choice of law and jurisdiction clauses are enforceable in Singapore. Parties are therefore free to agree to resolve disputes in a jurisdiction other than that of their governing law. With the establishment of the Singapore International Commercial Court (SICC) in 2013, parties can commence an action subject to foreign law in a Singaporean court.

However, choice of venue clauses are not necessarily enforceable in Singapore as claimants must commence an action in specific courts depending on the value of the claim (see Question 33). In addition, the High Court, District Court and Magistrates' Court can only hear disputes that are subject to Singapore law. The SICC only hear matters of an international and commercial nature where parties are not seeking relief in the form of a prerogative order.

 

Reform

36. What proposals are there for reform of the law, regulation or rules relating to the provision of insurance or reinsurance services?

In January 2013, the Financial Advisory Industry Review proposed several reforms to regulations governing insurers. These proposals include, among others:

  • Imposing management expertise, financial and compliance requirements on insurance brokers.

  • Launching direct sales channels to allow consumers to buy insurance products directly from insurers.

Although the Monetary Authority of Singapore (MAS) has released a consultation paper on the proposed amendments in October 2014, these reforms have not been introduced into the relevant regulations and legislation to date.

Academic commentary has also called for a reform of consumer insurance law on the model of the UK's Consumer Insurance (Disclosure and Representations) Act 2012, to introduce more "consumer-friendly" provisions and simplify what is currently an outdated and complex legal framework. It is proposed that the consumer's duty of disclosure should be replaced by a duty to take reasonable care not to misrepresent facts, which would alleviate the severe consequences of a breach of the duty of utmost good faith (see Question 20). It is also proposed that current consume law should offer consumers greater protections by providing them with a remedy in the event of an insurer's breach of contract (for example, damages).

 

Main insurance/reinsurance trade organisations

General Insurance Association of Singapore (GIA)

Main activities. The GIA is a trade association with the mission of making all aspects of general insurance such as motor, fire and personal accident insurance policies more accessible, transparent and user-friendly to the Singaporean public. It promotes the image and reputation of the general insurance industry in Singapore and fosters a conducive environment in which member companies can grow their business. The GIA currently represents 38 general insurance companies operating in Singapore.

W www.gia.org.sg/

Life Insurance Association of Singapore (LIA)

Main activities. The LIA is a not-for-profit trade organisation representing life insurance product providers and life reinsurance providers based in Singapore. Its mission is to promote a progressive life insurance industry by enhancing consumer understanding, promoting industry best practices, and fostering a spirit of collaboration and mutual respect with government and business leaders. The LIA currently has 25 members: 21 life insurers and four life reinsurers.

W www.lia.org.sg

Motor Insurers' Bureau of Singapore (MIB)

Main activities. The MIB is an independent body set up by insurers to compensate people injured in road accidents caused by negligent untraced or uninsured motorists. It provides cover for physical injury claims only, in accordance with the Untraced Drivers' Agreement and the Uninsured Drivers' Agreement between the Government, the MIB and general insurance companies. The MIB is funded by motor insurance insurers.

W www.gia.org.sg/public_mib.php



Online resources

Current acts and subsidiary legislation (Singapore)

W http://statutes.agc.gov.sg

Description. This is the official website of the Singapore Government for online publication of legislation. It is maintained by the Attorney General Chambers of Singapore and contains current versions of all legislation and acts passed by the Singapore Government.

Monetary Authority of Singapore (MAS)

W www.mas.gov.sg/regulations-and-financial-stability/regulations-guidance-and-licensing/insurance.aspx

Description. This is the official website of MAS. It provides access to regulations, circulars and notices issued by the Authority that are relevant to insurance companies.

Inland Revenue of Singapore

W www.iras.gov.sg/irashome/page04.aspx?id=900

Description. This is the official website of the Inland Revenue of Singapore, the body responsible for collecting income tax. It contains a list of current and past subsidiary legislation to the Income Tax Act.



Contributor profiles

Richard Kuek, Partner

Gurbani & Co

T +65 6336 7727
F +65 6336 0110
E richard@gurbaniandco.com
W www.gurbaniandco.com

Professional qualifications. England & Wales, Barrister-at-Law, Lincoln's Inn, 1980; Singapore, Advocate and Solicitor, 1981

Areas of practice. Shipping and Admiralty; General and Marine Insurance; Reinsurance; Carriage; International Trade; Commercial Litigation; Arbitration.

Non- professional qualifications. LLB, University of London, 1979; LLM, University of London, 1981

Recent Transactions

  • Advised various insurers in respect of BBB (banker blanket bond), private equity management liability, financial institution, electronic crime and civil liability, product liability and professional indemnity policies.

  • Advised a reinsurer on a retrocession policy.

  • Advised insurers on H&M and cargo policies.

  • Acted as counsel in a dispute relating to the sale and purchase of a ship.

  • Acted as counsel in a dispute relating to damage sustained by a vessel during repairs by a shipyard.

  • Acted as counsel for cargo owners on application to stay proceedings lis alibi pendens.

  • Acted as counsel for a foreign bank in an application for an injunction against a vessel.

  • Acted as solicitor and counsel for various claimants and defendants in in rem actions and in the arrest of vessels or the release of an arrested vessel.

  • Acted as counsel for an insurance company in respect of a workman's compensation policy.

  • Represented various insurers and P&I Clubs in claims in respect of carriage of goods disputes and collision between vessels.

Languages. English, Malay

Professional associations/memberships.

  • Accredited Arbitrator at the Singapore International Arbitration Centre (SIAC) and Singapore Chamber of Maritime Arbitration (SCMA).

  • Committee member of the Property and Marine Committee of the General Insurance Association of Singapore (GIA).

  • Lay member of the Complaints and Disciplinary Panel of the Accounting and Corporate Regulatory Authority of Singapore (ACRA).

  • Member of the Law Society.

  • Member of the Insurance Law Association.

  • Member of the Maritime Law Association of Singapore.

R Govintharasah, Partner

Gurbani & Co

T +65 6336 7727
F +65 6336 0110
E govin@gurbaniandco.com
W www.gurbaniandco.com

Professional qualifications. Singapore, Advocate and Solicitor, 1989

Areas of practice. General and Marine Insurance; Shipping and Admiralty; International Trade; Carriage; Commercial and Civil Litigation; Arbitration.

Non- professional qualifications. LLB, National University of Singapore, 1988

Recent Transactions

  • Represented a Dubai and Singapore-based company in contract negotiations for the acquisition of the Singapore arm of a multinational company.

  • Advised clients on agreements for leasing construction machinery locally and for overseas deployment in Malaysia and Turkey.

  • Drafted various commercial contracts for clients, including a contract for the manufacturing of tower crane parts in their China-based factory, and prepared a series of agreements for the sale, shipment and storage of recycled oil for a local recycling company.

  • Acted as counsel for a local supplier of pre-fabricated construction slabs involving a successful claim and successfully defending a counterclaim by the main contractors for liquidated damages.

  • Acted as counsel for P&I Club in the investigation of a barge grounding incident in December 2014.

  • Acted as counsel for various claimants in their in rem actions and the arrest and sale of three vessels before the High Court of Singapore in 2013/2014.

  • Instructed foreign law firms on behalf of Singapore companies, and oversaw and advised on the strategy and progress of such litigation in other jurisdictions.

Languages. English, Malay

Professional associations/memberships.

  • Accredited Arbitrator under the Singapore Institute of Arbitrators and the Law Society of Singapore's Panel of Arbitrators.

  • Member of the Law Society of Singapore.

  • Member of the Singapore Academy of Law.

  • Member of the Maritime Law Association of Singapore.

Tan Hui Tsing, Partner

Gurbani & Co

T +65 6336 7727
F +65 6336 0110
E huitsing@gurbaniandco.com
W www.gurbaniandco.com

Professional qualifications. England & Wales, Barrister-at-Law, Middle Temple, 1995; Singapore, Advocate and Solicitor, 1997

Areas of practice. Shipping and Admiralty; Carriage; International Trade; Commercial Litigation; Sale and Purchase Agreements; General and Marine Insurance.

Non-professional qualifications. LLB, University of Bristol, 1994; LLM, University of Southampton, 2004

Recent Transactions

  • Successfully negotiated a settlement on behalf of an insurer with an insured for crane damage while at job site involving multiple parties, including cargo interests, the crane owner, the insured (owner of trailer) and the party organising the works.

  • Successfully recovered a collision damage claim from a charterer for owners of a barge and negotiated settlement for the owners against the opponent vessel.

  • Successfully acted for cargo interests to increase the tonnage limitation fund set up by the owners.

Languages. English, Mandarin (Chinese)

Professional associations/memberships.

  • Member of the Law Society of Singapore.

  • Member of the Singapore Academy of Law.

  • Member of the Maritime Law Association of Singapore.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1248152565965", "objName" : "Insurance and Reinsurance in Singapore", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/1-610-0408?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "25e8a493e:15b01daf53e:-43e6", "analyticsSessionCookie" : "25e8a493e:15b01daf53e:-43e5", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }