Singapore law primarily comprises statutory law and common law.

Statutes become law when bills are passed by the Parliament of Singapore, having been scrutinised by the Presidential Council for Minority Rights and assented to by the President of Singapore. These statutes are often supplemented by subsidiary legislation passed by the relevant government agencies or ministers, and by notices, directives, guidelines and codes issued by the relevant regulatory authority.

Singapore has also inherited the common law system from the British, where a body of law is created incrementally through judgments decided by the courts, setting precedents to be followed by lower courts.

Section 3 of the Application of English Law Act (Cap 7A) states that the common law of England, insofar as it was part of the law of Singapore before 12 November 1993, shall continue to be part of the law of Singapore. Beyond that, the courts of Singapore are bound only by their own decisions.

The sources of insurance and reinsurance law in Singapore are the Insurance Act 1966, the Marine Insurance Act 1906, the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011, some subsidiary legislation and case law.

In Singapore, the Insurance Act (Cap 142) (the “Insurance Act”) is the primary legislation that regulates and deals with insurance and reinsurance activities, including insurance intermediaries and related institutions. Under the Insurance Act, the Monetary Authority of Singapore (MAS) has the power to promulgate subsidiary legislation.

The MAS exercises control over financial institutions and their related entities, including insurance companies. by virtue of the Monetary Authority of Singapore Act (Cap 186) and the Insurance Act.

Other pieces of legislation regulate specific types of insurance, such as the Motor Vehicles (Third Party Risks and Compensation) Act (Cap 189), the Work Injury Compensation Act (Cap 354) and the Marine Insurance Act 1906 (Cap 387). In addition, the provisions found in the following English statutes in 1994 continue to have force of law in Singapore:

• the Policies of Assurance Act 1867; and
• the Third Parties (Rights against Insurers) Act 1930.

The provision and conduct of insurance and reinsurance business is primarily regulated under the Insurance Act (Cap 142), while insurance intermediaries are primarily regulated under the Insurance Act (Cap 142) and, in respect of life business, the Financial Advisers Act (Cap 110).

A person who carries on any class of insurance business will need to be licensed under Section 8 of the Insurance Act. To obtain a licence to carry on insurance business in Singapore, the insurer must:

• apply in writing to the MAS for a licence;
• be a company incorporated in Singapore, a company with an established place of business in Singapore or a co-operative society registered under the Co-operative Societies Act (Cap 62);
• fulfil such financial requirements as may be prescribed; and
• satisfy such fund solvency requirements as may be prescribed.

Any person who carries on reinsurance business will need to be authorised under Section 34 of the Insurance Act. There are also other schemes whereby insurers may be subject to different or lighter regulation, which are discussed further in 3.1 Overseas-Based Insurers or Reinsurers.

Singapore adopts a territorial basis of taxation. Therefore, only income accruing in or derived from Singapore or income received (or deemed to be received) in Singapore from outside Singapore will be subject to Singapore income tax.

The current corporate income tax rate is 17%.

Insurance policy premiums are tax deductible only if they are expenses incurred wholly and exclusively in the production of income; see Sections 26 and 43C of the Income Tax Act (Cap 134).

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 is performed only partly in Singapore or wholly outside Singapore if such act has a substantial and reasonably foreseeable effect in Singapore.

A “foreign insurer” means an insurer that is authorised under the laws of a foreign country to carry on insurance business in that foreign country but is not licensed under Section 8 as an insurer nor authorised under Section 34 as a reinsurer. A foreign insurer will carry on business in Singapore under a foreign insurer scheme established under Section 35B of the Insurance Act.

Under the authorised foreign insurers scheme, overseas reinsurers that do not have a physical presence in Singapore and provide insurance services from overseas to persons in Singapore may avail themselves of a lighter-touch regime by applying to be authorised reinsurers, in which case they are not required to set up and maintain separate insurance funds for policies taken out by persons in Singapore, nor to comply with solvency margin requirements. The assessment criteria are largely the same as those for direct insurers, which are set out in 2.2 The Writing of Insurance and Reinsurance.

Almost all licensed/authorised insurers and reinsurers must have a presence in Singapore, although there are a few exceptions, such as:

• authorised foreign reinsurers;
• approved marine, aviation and transit insurers; and
• insurers carrying on business under a foreign insurer scheme.

Marine and Aviation

To help develop Singapore as a marine and aviation insurance centre, overseas specialist insurers providing marine, aviation or transit (MAT) insurance that are specifically approved by the MAS shall also be exempt from licensing in Singapore and be subject to lighter regulation. Such overseas insurers must be situated in designated countries and fulfil the following conditions:

• they must not write insurance business, other than the collection or receipt of premiums in relation to MAT insurance business;
• they must not have a physical presence in Singapore; and
• they must provide insurance services from overseas to persons in Singapore.

The Insurance (Approved Marine, Aviation and Transit Insurers) Regulations 2003 (the “Insurance Regulations”) set out requirements for insurers approved to write MAT insurance, and approved MAT insurers can operate in Singapore if they are approved under the Insurance Regulations.

There is no outright legal prohibition against fronting or a similar arrangement, unless the purpose is to frustrate regulatory requirements. Insurers would typically engage the MAS before carrying out any such arrangement.

The COVID-19 crisis has been an extraordinary global shock, disrupting both supply and demand in an interconnected global economy. The devastating impact of the COVID-19 pandemic has caused a vicious cycle of dampening business and consumer confidence, and tightening financial conditions and job losses, worsening economic prospects and sending shockwaves through the global economy and the global M&A market. Recent years, however, have seen a recovery in the Singapore M&A market and rapid growth.

M&A Scheme

An M&A scheme was introduced in Budget 2010 to encourage companies in Singapore to grow their businesses through M&A, by extending several benefits to Singapore-based companies to help with their acquisition strategies. It provides an M&A allowance, calculated on the total costs of the acquisition of shares in the target company, a stamp duty relief and a double tax deduction on transaction costs.

With the ongoing effects of COVID-19, the M&A market is unlikely ever to be “normal” again. Therefore, deal makers should prepare for a new reality by developing strategies and investment opportunities amid the COVID-19 experience to drive future success.

M&A allowance

The M&A scheme seeks to encourage Singapore companies to grow through strategic acquisitions. An M&A allowance is granted to a company that acquires the ordinary shares of the target company under the M&A scheme during the period 1 April 2010 to 31 December 2025. It is a tax allowance granted to the acquiring company for each year of assessment. In 2016, the existing cap for qualifying M&A deals was doubled from SGD20 million to SGD40 million to support more M&A. The allowance granted is equal to 25% of the total acquisition value for each year of assessment, with a purchase consideration cap fixed at SGD40 million.

Stamp duty relief

The acquiring company is granted a stamp duty relief capped at SGD80,000 under the M&A scheme. Stamp duty relief has lapsed for instruments executed on or after 1 April 2020 as announced in Budget 2020, so relief is not applicable for instruments executed on or after 1 April 2020.

Double tax deduction on transaction costs

The scheme provides a double tax deduction on transaction costs that are incurred in respect of qualifying share acquisitions made during the period 17 February 2012 to 31 December 2025. It includes professional fees and valuation fees, and the cap on the transaction costs is SGD100,000.

Experts say that South-East Asia is on track to witness its busiest year for M&A in over a decade, despite the COVID-19 pandemic, with technology expected to be the hottest sector. According to M&A data provider Dealogic, the region saw 482 deals worth USD85.2 billion announced in the first half of 2021, which was 141% higher than the 406 deals worth USD35.35 billion in 2020.

Insurance products may be distributed in the following ways, amongst others:

• through bank representatives;
• through insurance agents;
• through insurance brokers;
• online distribution without advice; and
• through tied representatives.

The obligations of the insured and insurer will be governed by the contract entered into between the parties.

Generally, the duty of the insured is to disclose material facts that a prudent insurer would take into account when reaching the decision of whether or not to accept that risk or what premium to charge.

In the case of marine insurance, the duty to disclose, and which facts need not be disclosed, is codified in the Marine Insurance Act (Cap 387).

An insurer has the right to avoid an insurance policy if there was non-disclosure of material facts on the part of the insured when the insurance contract was written.

A proposer is also entitled to the return of the premium where an insurer has breached its obligation to deal with the proposer with the utmost good faith.

The relationship between an intermediary (insurance agent) and the insurance company will be governed by a written contract. The general principles of agency will apply to determine the effect of representations made during negotiations. The Financial Advisers Act (Cap 110) makes it an offence for an intermediary to make representations with an intent to deceive.

On the other hand, any person who has agreed to procure insurance cover for another person may be regarded as that person’s agent. In such a case, the principal will be bound by the agreement that it has signed, regardless of whether the agent has procured the insurance policy according to their instructions or the fact that such insurance is outside their usual scope of services.

Section 20 of the Marine Insurance Act (Cap 387) specifically provides for representations made pending negotiation of contract by the assured or their agent.

The court has not issued a definition of an insurance contract, but reference can perhaps be made to the definition of an insurance business under the Insurance Act (Cap 142), which states that “insurance business in Singapore” means the business of assuming risk or undertaking liability in Singapore under policies, and of:

• receiving proposals for policies in Singapore;
• issuing policies in Singapore; or
• collecting or receiving premiums on policies in Singapore.

However, it does not include such businesses or activities, such class of businesses or activities, or such businesses or activities carried on by such persons or class of persons, as the authority may prescribe.

In general, there must be an offer, an acceptance and a consideration to complete the formation of the contract. Insurance contracts have been recognised as contract uberrimae fidei (ie, a contract based on the utmost good faith); see 6.1 Obligations of the Insured and Insurer.

A key requirement to ensure that an insurance contract in Singapore is not void is that the policyholder must have an insurable interest over the insured. In the case of life insurance, Section 57 of the Insurance Act specifically provides that a life policy will be void for lack of insurable interest. In the case of general insurance, Section 62 of the Insurance Act (Cap 142) sets out the general position that no person shall purchase insurance for which they have no insurable interest. However, see 12.1 Developments Impacting on Insurers or Insurance Products.

Section 62(2) of the Insurance Act (Cap 142) provides that it shall not be lawful to make any policy on any event without inserting in such policy the names of the persons interested therein, or for whose use or benefit, or on whose account, such policy was made.

Where the position with respect to consumer contracts or reinsurance contracts is different, this will have been highlighted in the appropriate sections.

Alternative risk transfer is risk protection using techniques other than traditional insurance and reinsurance to provide the business with coverage. ART blends risk retention and risk transfer at the lowest total cost of risk, and results in mutual alignment of the financial interests of both the insurer and the insured.

There are two broad segments to the ART market:

• risk transfer through alternative carriers, which encompasses self-insurance, pools, captives and risk retention groups (RRGs); and
• risk transfer through alternative products, which generally includes transactions such as integrated multi-line products, insurance-linked securities (ILS) or catastrophe (CAT) bonds, credit securitisation, committed capital, weather derivatives and finite risk products.

The MAS has stated that Singapore aims to be a global capital for Asian risk transfer by 2025, offering a wide spectrum of risk financing solutions that go beyond traditional insurance and reinsurance, to risk pools and ART mechanisms such as ILS. In Singapore, ILS were first launched in February 2018 to encourage ILS issuances and to develop the region as Asia’s leading hub for ILS business. The ILS grant scheme funds 100% of certain upfront issuance costs of CAT bonds in Singapore, up to SGD2 million. The MAS extended its ILS grant scheme to the end of 2022 alongside the region’s desire to expand the range of ILS products available beyond CAT bonds.

The MAS has been running a consultation process seeking feedback on proposals to update two areas of the ILS regulatory regime.

The MAS proposes to exclude special purpose reinsurance vehicles (SPRVs), such as CAT bonds or ILS issuance vehicles, from certain investment-related requirements for insurance and reinsurance companies registered in Singapore.

As policyholders of SPRVs are the sponsors of ILS transactions, these policyholders will have access to relevant information to understand the risks to which the SPRV is exposed, and the manner in which the risks are managed. Therefore, the MAS also proposes adding SPRVs to the list of entities that do not have to make full public disclosures, such as captive insurers, marine mutual insurers and run-off insurers.

Singapore has supported nine CAT bond issuances, including the following landmark transactions:

• the first full Rule 144A CAT bond issued by Security First Insurance Company in May 2020, which reflects Singapore’s capabilities to support the most liquid type of ILS offering;
• the first Asian sovereign CAT bond covering earthquake and typhoon risks in the Philippines, which was also the first CAT bond listed on the Singapore Exchange; and
• the first Asian CAT bond covering typhoon and flood risks in Japan, sponsored by Mitsui Sumitomo Insurance.

According to data from Artemis, Singapore played host to four CAT bond transactions in 2021, from three US sponsors and one Japanese sponsor.

Singapore was the domicile of choice for six CAT bond sponsors in 2020 and three in 2019.

There is no specific regime for the recognition of overseas ART transactions. Whether such transactions will be treated as reinsurance for the purposes of the Singapore regulatory regime would therefore depend on whether they meet the common law definition of insurance.

The general contractual principles of interpretation will apply to the interpretation of an insurance contract. Principles that have been observed include the following:

• the aim of the exercise of the construction of a contract is to ascertain and give effect to the objection intentions of the parties;
• a holistic approach will be taken, looking at the whole contract; and
• this exercise will be informed by the surrounding circumstances or external context.

In this regard, the use of extrinsic evidence is subject to the following requirements:

• it is limited to ascertaining the interpretation of the term itself, and not to usurp the authority of the written agreement or contradict, vary, add to or subtract from its terms; and
• it has to be relevant, reasonably available to all contracting parties and relate to a clear and obvious context.

In the case of standard-form contracts, likely to include consumer contracts, the presumption is that all the terms of the agreement between the parties are contained in the contract and it will be almost impossible to allow the use of extrinsic evidence in construing such a contract. In addition, the Singapore Court of Appeal has noted, in particular, the use of the contra proferentum rule in interpreting the scope of conditions precedent in insurance contracts.

In the specific context of insurance law, “warranty” is used to refer to where the insured has undertaken that some particular thing shall or shall not be done or that a particular fact does or does not exist. A warranty does not need to be expressly described as such and may be implied into the contract as well. The result of a breach of a warranty is that the insurer has the right to terminate the contract. It is of no consequence that the breach may have been immaterial to the risk or loss or that the breach was not fundamental.

A condition precedent is understood as a term in a contract that must be satisfied before the obligations of the other party arise. Where a condition precedent has not been satisfied, the insurer is simply not liable to meet the insured’s claim as the insured has failed to carry out the steps required of it to establish the insurer’s liability.

The Singapore Court of Appeal has observed that insurance policies are invariably drafted and/or vetted by experts for the benefit of insurers so as to protect the latter’s interest. As such, the contra proferentum rule is frequently raised to interpret the scope of conditions precedent in insurance contracts. Factors that are taken into account in this interpretation exercise are the workability of the contractual obligation as a condition precedent to liability and the purpose of the condition.

If the parties are unable to come to an agreement about the coverage of the insurance contract, they may choose to enter into alternative dispute resolution (see 9.7 Alternative Dispute Resolution) or commence legal proceedings (see 9.3 Litigation Process).

In Singapore, the MAS is the main body that supervises and regulates insurance and reinsurance activities under the Monetary Authority of Singapore Act (Cap 186) and the Insurance Act (Cap 142).

The following associations also play an essential role in the regulation of insurers and insurance intermediaries by issuing internal codes of conduct and guidelines to regulate the conduct of their members:

• the Life Insurance Association (LIA) (the trade association of life insurers); and
• the General Insurance Association (GIA) (the trade association of general insurers).

The complainant may also approach the Financial Industry Disputes Resolution Centre Ltd (FIDReC), which is an independent institution that aims to provide a one-stop shop for consumers (ie, individuals or sole proprietors) to resolve disputes with financial institutions (including insurers) and can hear claims of up to SGD100,000.

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

Generally, insurance contracts will include clauses that provide for the choice of court and law. The court will give effect to such a clause, so disputes in insurance law concerning the proper forum or governing law are rare. This is further affirmed by the passing of the Choice of Courts Agreement Act 2016, Section 9(6) of which affirms that a proceeding under a contract of insurance and reinsurance is not excluded from the application of the Act by reason only that the contract relates to a matter to which the Act does not apply.

If the contract does not include a choice of law clause, the court will examine a variety of factors in determining the implied law of the contract, including the commercial purpose of the transaction, the places of residence of the contracting parties and the choice of court. If the courts find that there was no implied choice of law term, they will then determine the objective proper law, which is the law with the closest and most real connection with the contract.

If the contract does not include a choice of court clause, the court will examine whether Singapore is forum conveniens, if there is a serious issue to be tried on the merits and if there is a good arguable case that comes within one of the grounds enumerated in the Rules of Court Order 11.

There are three courts in Singapore that will likely hear a dispute over an insurance contract at first instance:

• the Magistrate’s Court;
• the District Court; and
• the High Court.

The State Courts comprise the Magistrate’s Court and the District Court. The Magistrate’s Court hears claims not exceeding SGD60,000 and the District Court hears claims exceeding SGD60,000 but under SGD250,000 (or up to SGD500,000 for road accident claims or claims for personal injuries arising out of industrial accidents). The General Division of the High Court hears claims above SGD250,000. The Supreme Court comprises the General Division of the High Court and the Court of Appeal. The Court of Appeal generally exercises appellate jurisdiction.

It should be noted that actions started in the Magistrate’s Court will have to go through alternative dispute resolution (ADR) unless parties are able to give a good explanation as to why this would not be appropriate; see 9.7 Alternative Dispute Resolution.

Overview of Court Proceedings

Civil proceedings may be initiated by writ of summons (if a substantial dispute of fact is likely to arise) or by originating summons (generally appropriate for disputes concerning matters of law).

Under Singapore law and the Singapore court system, there are various means by which proceedings may be resolved or terminated before trial, such as:

• entering a default judgment against the defendant;
• applying for a summary judgment;
• applying for judgment on admission of facts; and
• applying for pleadings to be struck out.

If parties are unable to resolve their conflict, they will have to go through the process of discovery. Parties are expected to disclose all documents upon which they (will) rely, and documents that could adversely affect their own case, affect another party’s case or support another party’s case and that are relevant and necessary. Parties can also ask for specific discovery of:

• documents upon which a party will rely;
• a document that could adversely affect their own case or another party’s case; or
• a document that may lead the party seeking discovery of it to a train of enquiry resulting in obtaining information that may support another party’s case and that is relevant and necessary.

Evidence is also given in the form of affidavits of evidence-in-chief, which are sworn on by witnesses before trial and upon which the witnesses can be examined during trial.

The limitation period for contractual claims is six years under the Limitation Act (Cap 163).

Singapore is a contracting party to the 2005 Hague Convention on Choice of Court Agreements, given effect by the passing of the Choice of Court Agreements Act 2016. Accordingly, judgments obtained from the Singapore courts may be recognised and enforced in the courts of other contracting states. Section 18 of the Choice of Court Agreements Act 2016 specifically provides that the High Court may not limit or refuse the recognition or enforcement of a foreign judgment of liability under the terms of a contract of insurance or reinsurance on the ground that the liability under the contract includes liability to indemnify the insured or reinsured in respect of a matter to which this Act does not apply or an award of damages that will not be recognised or enforced under Section 16 of the Act.

The Reciprocal Enforcement of Commonwealth Judgments Act (Cap 264) (RECJA) and Reciprocal Enforcement of Foreign Judgments Act (Cap 265) (REFJA) will not apply to any judgment that may be recognised or enforced in Singapore under the Choice of Court Agreements Act 2016. The RECJA is intended to facilitate the reciprocal enforcement of judgments and awards in Singapore and other Commonwealth countries, subject to the restrictions provided in Section 3. The REFJA allows for the recognition and enforcement of judgments of a foreign country that gives reciprocal treatment to judgments obtained from the Singapore courts.

By virtue of the existing Choice of Courts Agreement Act, RECJA and REFJA, foreign judgments obtained from the following countries may be registered in Singapore:

• any European Union country;
• Australia;
• Brunei Darussalam;
• Denmark;
• Hong Kong;
• India (except the state of Jammu and Kashmir);
• Malaysia;
• Mexico;
• Montenegro;
• New Zealand;
• Pakistan;
• Papua New Guinea;
• Sri Lanka;
• the United Kingdom; and
• the Windward Islands.

If the judgment has not been obtained from one of these countries, the court will refer to common law principles – ie, it will need to be shown that the judgment is on the merits and is for a sum of money, that the foreign court has international jurisdiction according to Singapore conflict rules and that the judgment is final and conclusive.

Any application for registration of a foreign judgment in Singapore must be completed within six years after the date of the judgment, or where there have been proceedings by way of appeal against the judgment, after the date of the last judgment given in those proceedings.

The Singapore courts will respect the existence of arbitration clauses in an insurance or reinsurance contract and enforce such a clause.

The recognition and enforcement of arbitral awards is provided for in the Arbitration Act (Cap 10) and the International Arbitration Act (Cap 143A). An arbitral award may, by leave of the High Court, be enforced in the same manner as a judgment or an order to the same effect and, where leave is given, the judgment may be entered in terms of the award.

As Singapore is party to the 1958 New York Convention, foreign arbitral awards made in a Convention country are generally enforceable in the Singapore courts. A foreign award may be enforced in the same manner as an award of an arbitrator made in Singapore.

As Singapore is an ADR hub, the Singapore legal system encourages parties to consider their options before commencing legal proceedings.

For actions that are commenced in the Magistrate’s Court, parties are expected to fill out Alternative Dispute Resolution Form 7, requiring them to consider their ADR options, including mediation, conciliation, neutral evaluation and arbitration. For proceedings commenced in the District Court, the duty registrar may also recommend ADR. This is offered for free or for low fees by the State Courts Centre for Dispute Resolution.

The Singapore courts actively support and encourage the use of ADR. Several channels of dispute resolution are available to parties:

• mediation;
• arbitration;
• neutral evaluation; and
• conciliation.

The popular ADR methods in Singapore are mediation, arbitration and neutral evaluation.

Whilst it is not mandatory for parties to make any attempts to resolve claims by mediation or any other means of dispute resolution, there may be cost consequences at the conclusion of the trial if parties have not fully explored such ADR methods.

Insurers do not generally face penalties for late payments of claims in respect of late and improper delay in the payment of claims. However, see 12.1 Developments Impacting on Insurers or Insurance Products.

Subrogation, in the context of insurance, is the process by which the insurer assumes or takes on the rights or conditions of the assured that the assured has the right to exercise or acquire as a result of the loss or diminishment for which the assured is insured. The insurer has no greater right than that of the insured. Therefore, the insured is under a duty to not prejudice this right, including by way of claim against, or settlement with, a third party.

“Insurtech” refers to the innovative technologies and new digital tools developed to optimise the performance of insurance companies, improve the customer experience, enhance back-end processes and save insurance companies money. Insurance technology is poised to mature even more in 2023. Insurance companies are searching for evergreen solutions in technology that can scale and update with changing demands and capabilities to help them stay ahead of competitors. Insurtech companies leverage the latest insurance technologies to reduce costs for customers and insurers, improve operational efficiency, and improve the entire customer experience.

Smart Nation

In light of an increasingly digitised and knowledge-based economy, Singapore launched its Smart Nation initiative in November 2014. Smart Nation is an initiative under which people will be more empowered to live meaningful and fulfilled lives, enabled seamlessly by technology, and businesses can be more productive and seize new opportunities in the digital economy. The Singapore government’s Smart Nation initiatives grant a backdrop to the growth of start-ups offering digital services in the insurance sector.

COVID-19

COVID-19 has had a significant impact on every sector of the global economy and has served to reboot insurance digitalisation. As the consequences of COVID-19 continue to unfold, insurers have started to prepare for the future by accelerating the digitisation of their operations and planning for future business opportunities. There has been an exponential increase in demand for digital touchpoints/electronic interactions between a brand and its consumers along the buying journey from first discovery to follow-up after a sale due to lockdowns across the world and ongoing physical-distancing protocols.

Chatbots and smartphone apps are examples of how insurtech streamlines the back-end process. Chatbots automatically respond to enquiries all the time, and smartphone apps enhance the customer experience; for instance, instead of printing out a photocopy of documents, a customer can snap a picture and submit it through an app, while customer identity verification and the collection of data, proof of insurance and registration of client and account changes can be done through a mobile app or platform.

According to the Singapore Fintech Association’s insurtech directory, Singapore has become a hub for insurtech innovation and is boosting the region’s largest concentration of insurtech start-ups, with about 80 companies in South-East Asia.

PolicyPal

Singapore-based insurance start-up PolicyPal is the first company to graduate from the FinTech Regulatory Sandbox set up by the MAS in 2016. In 2019, the MAS unveiled the launch of a Sandbox Express, which gives firms a faster option to test certain innovative financial products and services in the market. The MAS fintech sandbox encourages experimentation and innovation in the financial industry. PolicyPal was incubated in the Paypal Innovation Lab, which helps to foster innovation, research and development, and entrepreneurship, and to mature the financial technology ecosystem and capability building in Singapore through collaboration with government agencies, institutes of higher learning, industry associations, etc.

In mid-June 2020, AMTD Digital announced that it completed the acquisition of PolicyPal; this transaction marks the first controlling-stake acquisition in the South-East Asian insurtech industry since the outbreak of COVID-19. Through this transaction, PolicyPal will realise its vision of being the leading innovator of Asia’s insurance industry under AMTD Digital’s overall lead.

Other Fintech Mergers and Collaborations

According to data from United Overseas Bank, 43 Singapore-based fintech firms received funding in the first half of 2021, totalling USD725 million – the highest in the industry’s history. Grab Financial Group (GFG) raised USD300 million in its Series A funding round, which was three times as much as the next-biggest deal (MatchMove's USD100 million Series D funding). This is a major milestone for GFG, as in previous years funds were raised under its parent company's name, Grab.

Other players include:

• GoBear, one of the leading fintech firms in South-East Asia, originally launched as a metasearch engine in 2015 before transitioning into a financial services and data platform;
• Inzsure, an insurtech firm that helps customers to better manage their portfolio of insurance policies and provide integrated services ranging from finding a suitable insurance product to claims and insurance management; and
• well-known insurtech player Singlife, a homegrown insurer that provides life and health insurance. In March 2020, Singlife launched Singapore’s first mobile insurance savings plan, the Singlife Account, with an accompanying Visa Debit Card.

Developments in the Fintech Sector

The MAS announced a SGD125 million support package for the financial and fintech sectors to deal with challenges from COVID-19. The financial support will ensure the strong recovery and future growth of the sectors.

Insurtech not only offers the opportunity for insurers to be more consumer-centric but also enables insurers to transition from a product and process-oriented business to a customer-oriented business focused on understanding and satisfying the needs of customers. An interesting question is to what extent the developments in insurtech have resulted in significant changes to the insurance industry as a whole, as opposed to simply providing refinements on how insurance products are distributed in Singapore.

Global–Asia Insurance Partnership

Singapore has launched the Global–Asia Insurance partnership (GAIP), a tripartite partnership between the global insurance industry, regulators and academia to address structural protection gaps in insurance. The aim of GAIP is to produce actionable research insight, develop policy recommendations and co-create innovative solutions for the region.

Singapore Financial Data Exchange

On 7 December 2020, the MAS and the Smart Nation and Digital Government Group (SNDGG) launched the Singapore Financial Data Exchange (SGFinDex), the world’s first public digital infrastructure to use a national digital identity and centrally managed online consent system. This enables individuals to access, via apps, financial information held across different government agencies and financial institutions. With SGFinDex, individuals will be able to retrieve their personal financial information – such as deposit accounts, credit cards and loans – by using their Singpass, enabling Singaporeans to consolidate their financial information for more effective financial planning.

SGFinDex is designed to ensure data protection and privacy of personal financial information. It will only transmit, and not store, any personal financial date.

In an innovative way to deliver financial products and services in a live environment, the MAS encourages experimentation and innovation. As such, it has developed a regulatory sandbox and provides an environment for companies to experiment with innovative fintech products and services. To encourage innovation in the financial industry, the MAS allows firms to test their products in the market within a clearly defined space.

There are two sandbox options:

• sandbox – for more complex business models where customisation is required to balance the risks and benefits of the experiment; and
• Sandbox Express – for fast-track approvals for activities where risks are low and well understood by the market. It provides firms with a faster option to test certain innovative financial products and services in the market. Eligible applicants can begin market testing in the pre-defined environment of Sandbox Express within 21 days of applying to the MAS.

Digital transformation expands the options and accessibility of financial services to consumers and is key to business success. New technologies are enabling financial services companies and insurers to overhaul their operations.

The Singapore Cyber-Risk Pool

Cybertechnology can enable and empower business and society if it is safe and trustworthy. A safe cyberspace is the collective responsibility of the government, businesses, individuals and the community. As part of efforts to develop the capacity to deal with cyber-attacks, Singapore set up the world’s first commercial cyber-risk pool in 2018. The cyber-risk insurance pool has been developed and set up in collaboration with the Singapore Reinsurers’ Association.

The Singapore cyber-risk pool committed up to USD1 billion of capacity to the cyber-insurance problem, bringing together both traditional insurance and ILS markets to provide bespoke cybersecurity coverage. The cyber-risk pool reflects Singapore’s standing as a specialty insurance hub and the commitment to creating forward-looking insurance solutions to tackle new and emerging risks.

On 9 July 2020, the MAS announced “Singapore – Pushing the ILS Frontier in ASIA” during the welcome speech by Benny Chey, assistant managing director of the MAS, at the sixth edition of the Artemis Insurance Linked Securities Asia Conference. Mr Chey stated: “The world, and the insurance industry in particular, needs to pay more attention to emerging complex risks such as pandemics, cyber risks, and climate change.”

COVID-19

The COVID-19 pandemic has posed questions for the insurance industry on a vast scale, such as loss of profit and business interruption.

Most commercial insurance claims are likely to be made in respect of business interruption losses for the revenue drop suffered as a result of disruption from lockdowns/circuit breakers. There are a few problems that policyholders may encounter in making claims.

• First, many of the more common wordings for business interruption coverage are drafted such that cover is triggered only if the insured’s property is physically damaged due to specified perils (eg, fire or floods).
• Second, since the SARS outbreak in 2003, business interruption coverage clauses have expressly drafted exclusions that specify SARS. Therefore, policyholders will have to assess if similar exclusions are present in their policies and, if so, whether such exclusion could be interpreted broadly enough to apply to the COVID-19 pandemic.
• Third, policyholders may also find themselves in potentially difficult situations relating to endorsements that may have actually been purchased to cover COVID-19-type losses. Some Lloyd’s underwriters have been sued for not covering COVID-19 business interruption losses under endorsements purchased specifically in response to the 2014 Ebola outbreak, because COVID-19 was not a specifically named disease in the endorsements.

With new risks emerging, insurers have to pay more attention to innovating and facilitating products for the market. Examples of such innovation include the following.

• In 2017, the World Bank first launched specialised bonds aimed at providing financial support to the Pandemic Emergency Financing Facility (PEF), which was created by the World Bank to channel surge funding to developing countries facing the risk of a pandemic. This was the first time that World Bank Bonds were used to finance efforts against infectious diseases.
• In 2019, the world’s first dedicated climate resilience bond, a new type of socially responsible product that aims to bring more focus on climate adaption, was issued by the European Bank for Reconstruction and Development.

The COVID-19 pandemic, along with the associated economic impact, has had a number of key financial implications for insurers, including uncertainty in business volumes, claim frequency and severity, capital impacts, customers’ ability to make premium payments, as well as changing risk profile and business mix. There is a need to reprice current products or modify product offerings to be more relevant in the COVID-19 environment, and to assess the existing reinsurance arrangements to understand the exposure to different counterparties and limits. Some insurance companies have offered detailed coverage for business interruption losses due to an infectious disease outbreak (eg, COVID-19) as a standalone policy or as an endorsement to a policyholder’s existing business interruption coverage. Some companies also provide free additional insurance cover against COVID-19 to their customers.

In February 2020, the Law Reform Subcommittee (Insurance) published its Report on Reforming Insurance Law in Singapore. Such reports tend to be referred to extensively by the Parliament of Singapore and the recommendations by the subcommittee should be taken seriously. Its recommendations can be summarised as follows:

• duties of utmost good faith and related areas of duty of disclosure, misrepresentation, warranties and remedies of fraudulent claims should be adopted as a single Insurance Contract Act;
• Sections 16 and 17 of the Australian Insurance Contracts Act should be adopted, which removes the requirement for an insurable interest in non-life-related or indemnity policies;
• Section 53(1) of the Marine Insurance Act (Cap 387) should be repealed and replaced with a provision stating that, unless agreed otherwise, a broker is not personally liable to pay the premium;
• Section 53(2) of the Marine Insurance Act (Cap 387) should be amended to make it clear that the lien provided therein should be extended to non-marine insurance; and
• a specific provision should be enacted that requires insurers to make payment within a reasonable time.

In order to increase insurance coverage and boost regional disaster resilience, the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) was launched in 2019, and is the first regional catastrophe risk facility established in Asia. Although it is domiciled in Singapore, it serves as a regional platform to provide climate and disaster risk management to South-East Asian countries. For a start, the SEADRIF project is to offer a risk insurance pool covering flood risks in Lao PDR, Myanmar and potentially Cambodia, with support from Japan, Singapore and the World Bank to provide immediate financing in the aftermath of a natural disaster. SEADRIF is a platform for ASEAN countries to access disaster risk financing solutions and increase financial resilience to climate and disaster risks. It also provides ASEAN countries with advisory and financial services for post-disaster rapid financing to reduce the impact on people and their livelihoods.

Moody's Investors Service Report

According to Moody’s Investors Service Report, Chinese life insurers’ resilient profitability and capitalisation, along with rebounding premium growth, support the stable outlook for the industry. Qian Zhu, the vice president and senior credit officer of Moody's Investors Service, said: “life insurers’ profitability will be supported by stable spread margins as they should be able to maintain investment yield of around 5% given the recent rebound in long-term yields as well as continued efforts to cap their cost of liability.”

SFA and LIA Partnership

On 7 December 2020, The Singapore FinTech Association (SFA) and the Life Insurance Association Singapore (LIA) signed a memorandum of understanding (MOU) on the sidelines of the Singapore FinTech Festival 2020. The MOU reaffirms the commitment of both associations to work towards the progress of the insurtech and fintech industries in Singapore.