Singapore is widely considered to be the regional hub and a global leader in the Asia-Pacific region for insurance, and remains an extremely competitive insurance market.

Singapore law comprises primarily statutory law as well as common law. The primary legislation governing the provision of insurance and reinsurance business is the Insurance Act, which is initially issued in 1966 and has been through 39 times of amendment and supplement.

Apart from the Insurance Act, there are other legislation regulating specific types of insurance such as marine insurance and motor vehicles insurance. In addition, through the Application of English Law Act, the provisions found in the following English statutes continue to have force of law in Singapore:

• Policies of Assurance Act 1867.
• Third Parties (Rights Against Insurers) Act 1930.
• Marine Insurance Act 1906.

The parent legislation is usually supplemented by subsidiary legislation as well as notices, directives, guidelines and codes that are issued by the relevant regulatory authority, all of which have the force of law with the exceptions of guidelines and codes.

The body that regulates the insurance and reinsurance business in Singapore is the Monetary Authority of Singapore (MAS).

Apart from the MAS, the Life Insurance Association (LIA) – the trade association of life insurers, and the General Insurance Association (GIA) – the trade association of general insurers also play an important role in the regulation of insurers and insurance intermediaries. These associations issue internal codes of conduct and guidelines to regulate the conduct of its members.


LICENSING/AUTHORISATION

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Unless an applicable exemption applies, any carrying on or solicitation of insurance and reinsurance business in Singapore or to the public in Singapore would be subject to licensing/authorisation requirements in Singapore. This applies even if the act only happens partly in Singapore or wholly outside Singapore if the act has a substantial and reasonably foreseeable effect in Singapore. 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.

There are also other schemes whereby insurers or reinsurers may be subject to different or lighter regulation. This includes the foreign insurer scheme and the authorised foreign reinsurer scheme. It is pursuant to the foreign insurer scheme that members of Lloyd’s of London (Lloyd’ Asia included) are able to conduct specified general insurance business in Singapore through locally incorporated service companies. Under these schemes, the insurers/reinsurers are not required to have a physical presence in Singapore. 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.


TAXATION

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Singapore adopts a territorial basis of taxation. Thus, only income accruing in or derived from Singapore or income received (or deemed received) in Singapore from outside Singapore will be subject to Singapore income tax. The current corporate income tax rate is 17%. Depending on the exact nature of their business, insurance and reinsurance companies may apply and qualify for certain tax concessions under the insurance business development umbrella schemes and enjoy concessionary tax rates on certain income.


INSURANCE CONTRACTS

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There is no statutory definition of a contract of insurance under Insurance Act. Under common law, as applied in Singapore, a contract of insurance is a contract under which an insurer agrees to indemnify an insured against the occurrence of a specified event for a premium. 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. 

Duty of utmost good faith

The English common law principle surrounding the formation of an insurance contract and in particular, the duty on the part of the insured to act in utmost good faith applies in Singapore. As such, an insurer has the right to avoid an insurance policy in the event that there is non-disclosure of material facts on the part of the insured when the insurance contract was written.

Insurable interest

A key requirement to ensure that an insurance contract in Singapore is not void is that the policy holder must have an insurable interest over the insured.

In the case of life insurance, s57 of the Insurance Act specifically provides that a life policy will be void for lack of insurable interest. It also codifies the presumption that a person has an insurable interest over their spouse and children under the age of 18 years. In recognition of the use of trust structures by wealthy individuals to purchase life policies, the Insurance Act has provisions which provide that the requirement for insurable interest is met even where a trust structure is employed, if insurable interest can be found between two parties had a trust structure not been used.

In the case of general insurance, s62 of the Insurance Act sets out the general position that no person shall purchase insurance for which they have no insurable interest.

Nomination of beneficiary framework

Singapore has a nomination of beneficiary framework which give the owner of certain types of policies insuring their own life a clear and affordable legal means to distribute the policy benefits to their nominees. It helps to ensure that the nominees will be able to receive the policy proceeds more quickly in the event of the policy holder’s death. Generally, life policies and accident and health insurance policies with death benefits that are issued by Singapore licensed insurers and governed by Singapore law are covered under the framework.

Under the framework, the policy owner can choose to whether to make a nomination, and if they so chooses, they may choose to make either a trust nomination or a revocable nomination.

In the case of a trust nomination, the policy owner loses all rights to the ownership of the policy. The policy owner will not be able to revoke the nomination, change the nomination or deal with the policy in any way without the consent of all the nominees. As it creates a trust in favour of the nominees, financial protection will be accorded to them in the sense that the policy proceeds will generally be protected from the policy holder’s creditors in the event of bankruptcy. In addition, the policy proceeds may be disaggregated for the purposes of estate planning. All proceeds whether payable during the policy holder’s lifetime or upon their death will belong to the nominees.

In the case of a revocable nomination, the policy owner is free to change the nomination and deal with the policy in any way they choose, without needing the agreement of the nominees. The policy holder will remain the owner of the policy and will retain full rights and control over it. All proceeds paid out during the lifetime of the policy holder will go to them. All policy proceeds paid out after their death will go to the nominees.

(Source: inhouselawyer.co.uk)