Monetary Authority of Singapore (MAS) has been approved by the parliament to include key measures to deal with an insurer before or after it goes into liquidation, and powers to amend the priority ranking of liabilities if an insurer becomes insolvent or is unable to meet its obligations.

This is in addition to the Policy Owner’s Protection Scheme, under the Insurance Act which states:

“the Policy Owners’ Protection (“PPF”) Scheme – exists to protect insurance policy owners.  The PPF Scheme is provided for in the Insurance Act to compensate policy owners of life policies and compulsory insurance policies  in the event that their insurer fails.  The existing PPF Scheme covers 90% of the liabilities for life policies and 100% of the liabilities for compulsory insurance policies.”

In the event that an insurer gets into financial difficulties, the existing Insurance Act allows MAS to direct the insurer to stop issuing or renewing policies to protect existing policy owners from any further deterioration of the insurer’s financial strength.

Author’s Comments:

This provides a comfort level that all registered insurers will be able to meet their liabilities:

1) Cash Values, bonuses already declared

2) Insured Value in case of claims

We occasionally get asked this question about what if the insurer collapse. Well, this is the answer.

That’s good news for insurance advisers and financial advisory practitioners.

Original Article: 12 Apr 2011, Straits Times: Better Protection for insurance policyholders



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