According to the Financial System Stability Assessment (FSSA) conducted by the International Monetary Fund (IMF) in 2004, Singapore showed a high level of compliance with the International Association of Insurance Supervisors (IAIS) principles promulgated in 2000. The FSSA found an adequately capitalized and profitable insurance sector in Singapore, with an ability to withstand significant shocks. Singapore was seen to be moving forward with initiatives on making its capital standards more comprehensive and risk-based, and introducing new rules on corporate governance and internal controls. The FSSA noted that implementation and enforcement of the above-mentioned initiatives would bring Singapore in closer compliance with the 2000 IAIS principles. The other key FSSA recommendations pertained to clarifying and issuing additional prudential rules, issuing corporate governance guidelines for insurers, and improving the off-site and on site supervision conducted by the Monetary Authority of Singapore (MAS). The 2006 Article IV report by the IMF mentions the progress made by Singapore in implementing the 2004 FSSA recommendations. It notes that Singapore launched the recommended risk-based capital framework in August 2004 and that insurers have been required to comply with the new framework since January 1, 2005. As far as the recommendations for improving corporate governance are concerned, the MAS website states that the Corporate Governance Guidelines for insurers were issued in 2005. However, there is insufficient information publicly available as to Singapore's compliance with the revised, more demanding Insurance Core Principles (ICPs) promulgated by the IAIS in October 2003.

General Overview

According to the Financial System Stability Assessment (FSSA) conducted by the International Monetary Fund (IMF) in 2004, "Singapore [had] a high level of observance of the IAIS principles" (p. 27) promulgated in 2000. The FSSA further found the insurance sector to be adequately capitalized and profitable, with an ability to withstand significant shocks. Singapore was also seen to be moving forward with initiatives on overhauling the capital standards to make them more comprehensive and risk-based, and introducing new rules on corporate governance and internal controls. The FSSA noted that implementation and enforcement of these initiatives would bring Singapore in closer compliance with the IAIS principles. The other key FSSA recommendations regarding insurance sector supervision included: (1) continue the reforms in the corporate governance and internal controls codes, especially with regard to the Notice on Corporate Governance and the Guidelines on Sound Risk Management Practices; (2) clarify and issue additional prudential rules, especially with regard to asset-liability match; off-shore assets including derivatives; minimum valuation for life insurance products; treatment of reinsurance recoveries for solvency purposes and counterparty risk; solvency requirements margins; and allocation of any available solvency margin between funds in wind up situations; (3) improve the reporting of off balance sheet items; and (4) enhance the authority of the Monetary Authority of Singapore (MAS) to perform on-site inspections in institutions to which companies have outsourced functions.

The 2006 Article IV report by the IMF mentions the progress made by Singapore in implementing FSSA recommendations. It notes that the recommendation to further enhance the MAS' legal and regulatory framework by implementing its new risk-based capital framework for the insurance industry has been implemented. Singapore launched the recommended risk-based capital framework in August 2004, and insurers have been required to comply with the new framework since January 1, 2005. The MAS website also indicates that the Corporate Governance Guidelines and Risk Management Guidelines for insurers have been issued. However, there is insufficient publicly available information as to Singapore's compliance with the individual ICPs promulgated by the IAIS in October 2003.

The MAS is charged with the responsibility for the supervision of insurance sector. The Insurance Supervision Department (ISD) within the MAS discharges such responsibility with the objective of exercising all powers and functions as laid down in the Insurance Act, and fostering a healthy and progressive insurance industry in Singapore. The MAS is listed as a member on the International Association of Insurance Supervisors (IAIS) website.

The MAS's 2007 Financial Stability Review provides information and statistics on the Singapore insurance sector. The insurance industry accounts for 6 percent of the financial sector assets. There are 85 insurers in Singapore, and they conduct their domestic business through the Singapore Insurance Fund, and their overseas business through the Offshore Insurance Fund. Both the life and non-life insurance sectors, per the report, were profitable and well capitalized in 2007, with both sectors posting capital adequacy ratios well above the regulatory minimum requirement of 120 percent. These have been possible mainly due to "strong balance sheets, adequate risk-based reserving, limited exposure to the US subprime market and prudent investments" (p. 32). The report, however, cautions the industry to maintain high underwriting standards while underwriting new insurance business to sustain its profitability and withstand market risks in an era of greater market volatility. The report notes that 30 percent of the insurance risks of non-life insurers in Singapore are reinsured, of which 40 percent are reinsured with subsidiaries or branches of global reinsurers.

The Principles

ICP 1 Conditions for effective insurance supervision

II

According to the 2004 FSSA, "all preconditions for effective supervision are in place" (p. 49). Singapore has a well-established, efficient and professional legal system with a high degree of integrity. The Institute of Certified Public Accountants of Singapore, a member of the International Accounting Standards Board, approves Singapore's Financial Reporting Standards (FRSs). The Singapore Actuarial Society has a Code of Conduct and a Disciplinary Scheme and, in 2002, the Society's constitution introduced new provisions on professional standards and guidance notes for actuaries. The MAS has a pool of highly experienced actuaries, with qualifications predominantly from professional associations in the United Kingdom, North America, and Australia. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 2 Supervisory objectives

II

The MAS is charged with the responsibility for the supervision of insurance sector. The ISD within the MAS discharges such responsibility with the objective of exercising all powers and functions as laid down in the Insurance Act, and fostering a healthy and progressive insurance industry in Singapore. The MAS website notes that the primary objective of the ISD is "the protection of policyholders' interests." The ISD also promotes the adoption of best practices by the insurance industry through its standards development role, wherein it adopts a consultative approach and works closely with industry associations in formulating insurance sector policies and standards. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 3 Supervisory authority

II

The MAS is charged with the responsibility for the supervision of insurance sector. The ISD within the MAS discharges such responsibility with the objective of exercising all powers and functions as laid down in the Insurance Act, and fostering a healthy and progressive insurance industry in Singapore. The ISD adopts a risk-based approach to the prudential and market conduct supervision of insurance companies. Further, the Monetary Authority of Singapore Act requires that the MAS establish a Board of Directors that is appointed by the President of Singapore on the recommendation of the Cabinet. The Board is responsible for policy making and general administration of the affairs of the organization. The directors hold office for three years, at the end of which they can be reappointed. The Managing Director of the MAS is also appointed by the President of Singapore, on the recommendation of the Public Service Commission. Legislation empowers and entrusts the Managing Director "to make decisions and exercise all powers and do all acts which may be exercised or done by the MAS, and to conduct the day-to-day administration of the MAS" (p. 44). Further, per the 2004 IMF FSSA, the MAS is self-funded and sets its own budget, which is approved by the President of Singapore. The IMF FSSA, however, notes that the Chairman of the MAS was, in 2004, also the Minister of Finance and the Deputy Prime Minister. The FSSA comments that multiple official responsibilities of the Chairman could result in conflict of interest, and advised the MAS to move to a structure of assigning responsibilities that would preclude conflicts of interest and foster transparency. The MAS responded by stating that there existed adequate institutional safeguards against such conflicts of interest, and there have been no instances of compromise in supervision due to the multiple responsibilities of the Chairman.

The 2006 IMF report finds that, as of August 2004, the Minister of Finance is no longer the Chairman of the MAS. However, the chairman --- being a senior minister -- still holds multiple responsibilities both in his ministry and in the MAS. The MAS asserts in this case, as reported in the IMF report, that it "has formalized the terms of reference for board level committees so as to delineate and document chairman's multiple roles and responsibilities, and prevent any ambiguity or potential conflicts of interest" (p. 29). The MAS staff has legal protection to discharge their supervisory duties in good faith. The supervisory staff is highly qualified, adequate, and enjoys salaries comparable to the private sector. The MAS also makes use of experts as required and subjects significant changes to the regulatory framework to the public consultative process. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 4 Supervisory process

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 5 Supervisory cooperation and information sharing

II

According to the 2004 IMF FSSA, information exchange, assistance, and cooperation with foreign supervisors are legally possible, albeit under a range of preconditions, including reciprocity. Confidential information sharing is also allowed to the MAS with mutual reciprocity, and the MAS officers are subject to comprehensive confidentiality requirements. The MAS website informs that the ISD "works with foreign supervisors as part of a holistic supervisory approach." However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 6 Licensing

II

According to the 2004 IMF FSSA, "comprehensive licensing criteria address the areas identified in the Core Principle" (p. 50) as promulgated in 2000. No person may start or conduct insurance business without proper registration. International insurers, insurance groups, and conglomerates operating in Singapore are also licensed and supervised by the MAS. Further, the solvency of subsidiaries, joint ventures of foreign companies, and foreign branches in Singapore is also supervised. Inadequate home supervision of foreign entities may lead to refusal of license or imposition of additional conditions on the supervised entity. The 2007 U.S. Department of State (DoS) report notes that when granting licenses, the MAS conducts extensive regulatory checks on applications, including fitness of directors. Despite this information, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 7 Suitability of persons

II

The 2007 U.S. DoS report notes that when granting licenses, the MAS conducts extensive regulatory checks on applications, including fitness of directors. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 8 Changes in control and portfolio transfers

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, "amendment of the memorandum and articles of association, reduction of paid-up capital, acquisition of 20 percent or more of voting rights in another company, mergers, establishment of new operations including subsidiaries, joint ventures and overseas branches, as well as the appointment of an underwriting or managing agent" (p. 50) require prior approval of the MAS.

ICP 9 Corporate governance

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, corporate governance rules only apply to listed insurers. The Boards of the insurers are required by law to supervise the investment policies and risk management functions of those firms, and to have their accounts audited by an external auditor. The FSSA observes that the then-proposed Notice on Corporate Governance would "address board composition and responsibilities, appointments and surveillance of external and internal audit functions, accountability, risk management functions and requirements for a Code of Conduct" (p. 50). The MAS, per the FSSA, was also in the process of issuing guidelines for direct insurers to enhance the role of the Board and the Chief Executive Officers of the insurers in the discharge of their duties towards the policy holders and depositors. The MAS website indicates that the MAS Guidelines on Corporate Governance for Banks, Financial Holding Companies and Direct Insurers incorporated in Singapore were issued in September 2005.

ICP 10 Internal control

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, the MAS has the power to review the internal controls of an insurer and request the entity to strengthen them if required. The FSSA finds that the proposed Guidelines on Sound Risk Management Practices contained provisions on sound internal controls and hoped that their implementation and enforcement would "significantly improve the [internal control] framework" (p. 50). The MAS Guidelines on Risk Management Practices have been issued and are available on the MAS website.

ICP 11 Market analysis

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 12 Reporting to supervisors and off-site monitoring

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, the MAS has comprehensive powers to set the scope and frequency of reporting and to seek any other information that it requires. The MAS is also equipped with an adequate legal framework to monitor insurers with the aid of annual audited financial statements and annual and quarterly reports. The FSSA recommends that reporting of the balance sheet items be improved. In response, the MAS stated that despite the lack of specific requirement to submit information on off balance sheet items (except derivatives) in law, the FRS in Singapore require that the insurers' annual financial statements contain such information, and this information is then forwarded to the MAS.

ICP 13 On-site inspection

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, the MAS conducts full-scale or limited on-site inspections as part of prudential and market conduct supervision. However, its powers to perform on-site inspections of non-financial institutions to which the insurers have outsourced functions is limited. The FSSA, therefore, recommends that Singapore provide the MAS with the authority to perform such inspections.

ICP 14 Preventive and corrective measures

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 15 Enforcement or sanctions

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, the MAS has the power to disallow and prevent the conduct of unauthorized business.

ICP 16 Winding-up & exit from the market

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, Singapore has generally clear legal provisions with regard to windup, "except for the treatment of surpluses in one fund when another fund in the same company is in deficit" (p. 51).

ICP 17 Group-wide supervision

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 18 Risk assessment and management

II

According to the 2004 IMF FSSA, the insurance legislation has comprehensive requirements pertaining to diversification of investments, provisioning and solvency. The MAS is also authorized to make rules on financial instruments and accounting and valuation tools. The FSSA finds that capital margin requirements are based on size of the firm and the risk undertaken, and are not assessed on a group basis. In the event of capital falling below the minimum requirement, the MAS has the authority to intervene. The FSSA also observes that the implementation and enforcement of the risk based capital framework in 2004 will bring Singapore closer to compliance with this principle. Per the 2006 IMF report, the recommended risk-based capital framework was launched in August 2004 and insurers have been required to comply with the new framework since January 1, 2005. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 19 Insurance activity

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, "there are generally appropriate rules and regulations in place regarding reinsurers" (p. 51). Reinsurance business by direct insurers is subject to the same rules as direct business. However, the FSSA finds that there are no provisions on exposure limits towards single reinsurers or reinsurance groups.

ICP 20 Liabilities

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. The 2004 IMF FSSA advises the MAS to issue detailed rules on the use of outstanding premiums, agents' balances, outstanding investment income and other receivables as well as motor vehicles and computer equipment as assets to balance insurance liabilities and solvency margin requirements.

ICP 21 Investments

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. According to the 2004 IMF FSSA, "the insurance legislation contains comprehensive standards on investments which address diversification by type, limits on asset categories, asset admissibility, and single counterparty exposures" (p. 50). The MAS is also authorized to make rules on financial instruments and accounting and valuation tools. The FSSA recommends the formulation of general rules on assets in offshore insurance funds and shareholders' funds, including on derivative use. It also finds that conservative investments and high liquidity levels point to the fact that assets are not efficiently utilized and hopes that the then ongoing development of the Asset Liability Modeling techniques in the industry will help improve investment efficiency. The MAS has a differing viewpoint on this subject. It states in a 2007 report that the general insurers have relatively conservative investment portfolios, dominated by cash, deposits, and government securities and have a low level of exposure to alternative investments. They are, therefore, not at the risk of being adversely impacted by the volatility of the financial markets.

ICP 22 Derivatives and similar commitments

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003. The 2004 IMF FSSA recommends the MAS to develop general rules on assets in offshore insurance funds and shareholders' funds, including on derivative use.

ICP 23 Capital adequacy and solvency

II

According to the 2004 IMF FSSA, capital margin requirements are based on the size of the firm and the risk undertaken, and are not assessed on a group basis. In the case of non-life insurance, business volume related capital requirement is higher for direct insurers than for reinsurers. In the event of capital falling below the minimum requirement, the MAS has the authority to intervene. The FSSA also observes that the implementation and enforcement of the risk based capital framework in 2004 will bring Singapore closer to compliance with this principle. (Per the 2006 IMF report, the recommended risk-based capital framework was launched in August 2004 and insurers have been required to comply with the new framework since January 1, 2005.) The FSSA, however, calls for more precise rules on the treatment of reinsurance for solvency purposes and counterparty risk. The FSSA also commends applying solvency margins requirements for both local and off-shore insurance funds to avoid regulatory arbitrage. In addition, the FSSA advises clarity in the stipulation of applying solvency margin between funds in wind up situations; and establishment of detailed rules on the use of outstanding premiums, agents balances, outstanding investment income and other receivables as well as motor vehicles and computer equipment as assets to cover insurance liabilities and solvency margin requirements. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 24 Intermediaries

II

According to the 2004 IMF FSSA, insurance brokers are directly licensed and supervised while the insurance agents are controlled through their principals. Further, the MAS has the power to stop those engaging in unauthorized business. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 25 Consumer protection

II

According to the 2004 IMF FSSA, insurers "explicitly agree to treat customers fairly" (p. 51). However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 26 Information, disclosure & transparency towards the market

II

According to the 2004 IMF FSSA, there are relevant information requirements that address disclosure to customers and information before insurance advice is offered or a contract is concluded. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 27 Fraud

II

There is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

II

Per the 2004 IMF FSSA, entities subject to the preventive measures under Singapore's anti-money laundering (AML) and combating the financing of terrorism (CFT) regime include life insurers. They have the duty to report suspicious transactions under the Corruption, Drug Trafficking and Other Serious Crimes Act. Per the 2007 U.S. DoS report, since 2000, extensive know your customer guidelines (in the form of sector specific MAS AML Notices) also exist for financial institutions, including life insurers and brokers. However, large currency transactions are not systematically reported. According to the FSSA, "Singapore financial institutions have a strong compliance culture with recognition of AML/CFT requirements, generally appropriate procedures in place, and careful implementation" (p. 84). The FSSA notes that the MAS has issued MAS Notices and guidelines to financial institutions for identifying suspicious transactions and on reporting procedures; and on basic Customer Due Diligence (CDD) measures and prohibiting anonymous accounts. Singapore's Financial Intelligence Unit, the Suspicious Transactions Reporting (STR) Office also provides regular guidance in the form of typologies and other types of interactive assistance. The FSSA also finds that AML/CFT inspections are regular and part of regular on-site inspections and offsite monitoring through internal and external audit reports. The FSSA, however, finds marked variations in the implementation of AML/CFT requirements by institutions, most likely due to different interpretations of MAS Notices, and therefore recommends that guidelines be clarified and made more stringent, especially with regard to conducting transactions without complete identification, identifying persons authorized to transact in the name of legal entities; identification of beneficial ownership; CDD measures and increased due diligence; suspicious transaction reporting without delays; adequate screening procedures for hiring; extending the tipping off procedures to reports under the Terrorism (Suppression of Financing) Act. In response, the Singapore authorities informed that they were working towards revising the MAS Notices, and the STR Office was also in the process of introducing a computerized system for facilitating STR by financial institutions and dissemination information and guidance to the institutions for AML/CFT compliance.

The 2006/2007 MAS annual report informs that the MAS issued revised AML/CFT Notices for the different financial sectors in March and April 2007, which inter alia introduced more rigorous CDD requirements; employed risk sensitivity to the CDD measures with enhanced due diligence for higher risk customers like politically exposed persons, and simplified due diligence for low risk customers; and imposed legally binding obligations on financial institutions. These notices were revised to keep them aligned to the revised Financial Action Task Force Recommendations.

The 2007 U.S. DoS report notes that the MAS conducts extensive regulatory checks on applications, including fitness of directors, when granting licenses. The 2004 IMF FSSA finds that full-scale examinations of institutions by the MAS cover AML/CFT inspections, and include sample testing of transactions and customer records, and visits to retail branches to test compliance at the field level. Post 9/11, the MAS was also found to have conducted a series of terrorist financing (TF) themed inspections of institutions. At the time of the FSSA, the MAS was in the midst of transitioning to a risk-based supervision system, and recommended the MAS to ensure ongoing AML/CFT inspections of institutions. However, there is insufficient information publicly available as to Singapore's compliance with this principle as revised by the IAIS in October 2003.