INSURANCE (AMENDMENT) BILL

Order for Second Reading read. 1.57 pm

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The Insurance Act was last amended in 1993. With the promulgation of the Insurance Intermediaries Bill 1999 which we have just dealt with, consequential amendments have to be made to the Insurance Act. At the same time, several amendments are also proposed which are aimed at clarifying the scope of present regulatory requirements and to reflect current practices in the insurance industry.

All the provisions in the Insurance Act that relate to agents and brokers will be repealed and taken up in the Insurance Intermediaries Bill.

Clause 3 (section 5A) of the Insurance (Amendment) Bill requires the setting up of new insurance representative offices to be approved by MAS. This control measure is necessary as representative offices can easily underwrite insurance business and it is difficult to uncover such activities. In addition, the clause prohibits, firstly, any persons in Singapore, including staff of unregistered insurers or any of their representatives, from soliciting direct insurance business for the unregistered insurers; and, secondly, the establishment of an office in Singapore by any person to solicit reinsurance business for unregistered insurers.

Clause 8 tightens the control of takeovers of insurers to include direct and indirect acquisition, holding or control and acquisition of a right to shares under an option. While the Insurance Act provides MAS with the power to control takeovers and substantial changes in shareholdings of locally incorporated insurers, the power does not extend to holding companies. The amendment widens the present control to include indirect shareholdings.

To safeguard policyholders' interest and to discourage insurers from granting unsecured credit facilities to directors or employees, clause 10 broadens the restriction on the granting of unsecured loans by insurers to directors and employees to include grant of unsecured advances.

Clause 12 updates the description of Lloyd's. Lloyd's, a society of underwriters in the UK and incorporated under the Lloyd's Act 1871, is an approved insurer under the Insurance Act. In recent years, it has undergone major structural changes. Since 1994, it has been admitting corporate memberships. Unlike the original Lloyd's members who are individuals, the corporate members can either be limited liability companies or partnerships. Consequently, the description of Lloyd's in the Insurance Act is no longer accurate.

The Bill also proposes, in clause 14, to clarify that where a registered insurer becomes insolvent, priority of claims would be granted to policyholders on an individual insurance fund basis. Assets of an insurance fund would be used, firstly, to meet the claims of its policyholders, secondly, the other creditors of that fund; and, finally, any balance in that fund would be released to other policyholders and creditors of the insurer.

Clause 15 provides for legal immunity of MAS and its employees in the course of carrying out its regulatory functions.

The existing section 54 of the Insurance Act requires MAS to prepare and submit to the Minister an annual report on the working of the Insurance Act for presentation to Parliament. Section 54 is no longer relevant and clause 16 seeks to repeal this provision. Prior to 1977, the Insurance Department (ID) was under the Ministry of Finance and its annual report was intended to ensure accountability. The Insurance Department was transferred to MAS on 1st April 1977, and with effect from 1st April 1998, has been brought under MAS' Financial Supervision Group to enable consolidated supervision of all financial institutions. It is no longer necessary for the Insurance Department to present an independent report to Parliament as MAS submits a comprehensive annual report, including the same matters required under section 54, to Parliament.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [BG Lee Hsien Loong].

Bill considered in Committee; reported without amendment; read a Third time and passed.