SINGAPORE’S urgency in amending its insurance laws comes out of German insurer Allianz’s bid for a majority share in Income Insurance being under “active consideration” by Income’s shareholders, said Monetary Authority of Singapore (MAS) deputy chairman Chee Hong Tat on Wednesday (Oct 16).
But Members of Parliament (MPs) raised concerns about the haste with which the government has moved to amend the law, and questioned an apparent lack of communication and coordination between the Ministry of Culture, Community and Youth (MCCY) and the MAS.
The Insurance (Amendment) Bill was tabled on Monday on an urgent basis – with the debate happening just two days later, instead of at the next Parliament sitting – as the government seeks to stop the deal between Allianz and Income going through in its present form.
On Wednesday, Chee stressed that the changes are needed as insurance co-operatives are “a special category of insurers with a social mission”.
On Monday, Minister for Culture, Community and Youth Edwin Tong said the government had deemed that it was “not in the public interest” for the transaction to proceed in its current form. His ministry had learnt new details that raised concerns about Income’s ability to keep fulfilling its social mission if the deal were to go through.
Proposed changes
Opening the debate on the Bill on Wednesday, Chee – who is also Transport Minister and Second Finance Minister – reiterated that the government does not have concerns over Allianz’s standing or suitability to acquire a majority stake in Income.
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Instead, the concern is over the terms and structure of the transaction, particularly in the context of Income’s corporatisation.
Chee gave a recap of the proposed legal changes. Currently, anyone seeking to obtain effective control or to become a substantial shareholder of a licensed insurer incorporated in Singapore needs prior written approval from MAS.
In assessing such applications, the MAS considers criteria such as the financial strength and track record of the applicant, and whether it is fit and proper. But there is no provision for it to consider the views of MCCY.
The government is thus proposing to amend this. The changes will allow the minister in charge of MAS to consider the views of the minister responsible for administering the Co-operative Societies Act (CSA), for applications relating to an insurer that is either a co-operative or linked to a co-operative.
This is the case for Income, which was originally a co-operative, but became a non-listed corporate entity two years ago.
At the time, it applied for a ministerial exemption from Section 88 of the CSA, which requires wound-up co-operatives to transfer any surplus funds to the Co-operative Societies Liquidation Account, after reimbursing members for their original share capital and unpaid dividends. Income assured MCCY that its social mission would remain unchanged.
The Insurance (Amendment) Bill, if passed, will enable the minister in charge of MAS to refuse approval for applications – if this is deemed in the public interest – after consulting the minister responsible for administering the CSA.
If MAS rejects the application due to such a refusal, its decision cannot be appealed.
Additionally, even when granting approval, the minister in charge of MAS may impose conditions as necessary. Violation of these conditions will be considered an offence.
MPs’ concerns
But MPs were concerned about the rush to amend the laws now.
One sticking point that the government flagged was an intended capital extraction exercise of S$1.85 billion under the proposed Income-Allianz deal. MP for Tanjong Pagar GRC Joan Pereira asked if this detail could have been shared during August’s parliamentary sitting, when MPs had questioned the deal.
She added that, given the nature and valuation of this deal, one would expect close coordination among the relevant authorities, such as MCCY and MAS, throughout the evaluation process.
Similarly, Workers’ Party (WP) MP Jamus Lim asked how much MAS knew about Allianz’s capital extraction exercise, and why no discussions were held between MAS and MCCY despite the significance of the deal.
He and fellow WP MP He Ting Ru described the Bill as a “good-faith effort”, but said it raises other legal and procedural considerations.
The legislative changes may be seen as rushed and retrospective, they said. With laws being changed in the middle of a major live transaction, this could undermine legal and regulatory certainty.
For such deals, parties should engage regulators early, before public announcements are made, said He. This is so that parties can identify potential impediments to the deals, assess the risk of regulatory blockage and address these issues through their transaction structuring, she added.
Progress Singapore Party Non-Constituency MPs Hazel Poa and Leong Mun Wai expressed concern over the haste of the amendments, and questioned the lack of transparency and communication regarding the sale of Income to Allianz.
Poa said she had reservations about amending the Insurance Act hastily to block the deal, saying this approach sets an unsettling precedent.
“As far as possible, the government should rely on existing laws when assessing deals for regulatory approval. This provides confidence to investors here and abroad that our regulatory framework is stable, even though the Bill we are debating today is tightly scoped,” she said.
Leong asked why MAS waited before sharing the terms of the proposed transaction and capital reduction plans with MCCY.
He acknowledged that it might not be possible to publicly disclose the full details of a proposed deal with market-sensitive information, but said that when information sharing is limited to government agencies, there is no reason to “gate-keep” it.
“A capital reduction exercise should have raised alarm bells in MAS, even from a prudential standpoint,” he said.
