Insurance (Amendment) Bill

Minister Chee Hong Tat.

Mr Deputy Speaker, I thank hon Members who have supported the Bill. I note that the WP plans to abstain and is not supporting the Bill.

Members have raised several important considerations relating to the Bill and I will summarise into three categories: first, how to strike a balance between regulations to protect public interest and maintain investor confidence; second, how does the Government ensure that inter-agency information exchange and coordination does not compromise on commercial confidentiality; and finally, clarifications on the capital reduction plan, Bill parameters and coverage.

Sir, please allow me to address the key points and the questions that Members have raised. Mr Liang Eng Hwa, Mr Saktiandi Supaat, Ms Joan Pereira, Mr Neil Parekh, Mr Mark Lee, Ms Usha Chandradas and Mr Yip Hon Weng have recognised the merits of the Government's intervention in this deal, while raising questions about its impact on business confidence and Singapore's role as an international insurance hub. They also asked about the likelihood of future Government interventions and how transparency can be maintained to preserve trust in our system.

I would like to assure the House that Singapore remains committed to upholding our status as an open, rules-based and pro-enterprise business hub. The same applies to MAS as the financial sector regulator. There is no change in this regard. We will continue to welcome investors with our business-friendly operating environment. When legislative amendments are proposed, the Bills are presented and debated in Parliament in an open and transparent manner. We would explain the rationale for the proposed changes, just like what we are doing now for this Bill.

MAS maintains a regulatory approach that is consultative and provides stability and predictability for industry players. As a standard practice, MAS consults on major policy and legislative changes. For complex policies, there could be a series of consultation papers to obtain feedback from stakeholders over an extended period. During these consultations, MAS would incorporate relevant feedback and address concerns that arise.

This Bill is an exception due to its urgency, because the deal with Allianz is under consideration by shareholders, and it is tightly scoped to co-operative insurers, insurers that have assumed the business of a co-op, or have a substantial shareholder or effective controller that is a co-op. This recognises that insurance co-ops are a special category of insurers with a social mission. As there is currently no provision in the Insurance Act which allows MAS to consider the views of MCCY in the case of an application relating to an insurer that is either a co-op or linked to a co-op, the proposed amendments would allow the Minister-in-charge of MAS to consider the views of the Minister responsible for the administration of the CSA and to withhold approval involving such applications if the Minister-in-charge of MAS considers that it is in the public interest to do so. The Bill does not affect any other insurer or the financial industry at large.

Mr Saktiandi asked about the Bill's impact on existing free trade agreements for activities in the financial services sector. It does not impact our free trade agreements. As I have explained earlier, we do not have concerns with the suitability of Allianz to be a majority shareholder of Income. Our concerns lie in the terms and structure of this particular deal, and such concerns would apply whether the acquiror is Allianz or any other entity, and whether the acquiror is local or foreign.

To Mr Neil Parekh's comment that control of Income should not be ceded to foreigners, I would reiterate that the Government agrees with NE's intention and Income's intention to find a strategic partner to strengthen its competitiveness and capital base in the long term so that it can continue to do well to do good. If the concerns of MCCY can be addressed in a future deal, the Government is open to consider such a proposal, whether it is from a foreign or local entity. The most important consideration is the outcome – that Income becomes a stronger entity that is able to serve its policy-holders well and fulfil its social mission effectively.

To Mr Saktiandi's question and also Mr Leong Mun Wai's question on whether we have engaged Allianz, the answer is yes, and they have indicated that they understood the reasons for the Government's decision. Mr Leong can have a look at their public statement.

Mr Neil Parekh asked how the Government will ensure that any future partner can contribute to the financial strength of Income, while still preserving its social mission. MAS has regulatory requirements and guidance in place for insurers to maintain sufficient capital reserves to meet policy-holder claims, including under adverse conditions, and for insurers to have robust risk management frameworks in place. As an insurer, Income continues to meet these requirements. With the Bill, the Minister-in-charge of MAS can, in giving his approval for an entity to obtain effective control or substantial shareholding in Income, impose conditions to ensure Income's commitments to its social mission are upheld post-transaction.

We agree with Mr Mark Lee that businesses should be given an opportunity to address and correct draft plans before final decisions or interventions are made, and this is, in fact, what MAS has done for the proposed transaction. As highlighted in Minster Edwin Tong's Ministerial Statement, while the Government has decided that it would not be in the public interest for the transaction, in its current form, to proceed, we are open for NE to work out a new deal, whether with Allianz or another entity, which can address MCCY's concerns.

Sir, there is a balance to be struck between effective Government functioning through information sharing and preserving commercial confidentiality to maintain investor confidence. Several Members spoke about this. And as I explained in the House on Monday, information provided to MAS as part of its supervisory dealings with financial institutions, including Income and Allianz, is confidential and not normally shared with other Government agencies. We recognise that companies submit such information for a specific regulatory purpose and not to enable general Government evaluation. And as Mr Mark Lee correctly pointed out, some of this information may involve sensitive decisions.

In this particular instance, Income had special characteristics. As a former co-op, it had previously been under the regulation of MCCY before its corporatisation. MCCY maintains an interest in whether Income continues to perform its social mission, as this was the representation given when Income was allowed to corporatise. Hence, while conducting its assessment, MAS considered that it was in the public interest to share the information with MCCY.

Ms Joan Pereira and Mr Mark Lee asked whether the information sharing and coordination among agencies could have been done earlier. MAS received business projections of the cash remittance in mid-July and was reviewing the information. As the MAS team was still assessing the proposal, they did not surface this information to the MAS Board before the 6 August Parliament Sitting. I had explained this on Monday. After the Parliamentary Sitting on 6 August, MAS saw that Income's planned capital optimisation and cash remittance could be relevant to MCCY's views on the proposed transaction and shared the information with MCCY. The Government then reached a view that it was not in the public interest for the deal in its current form to proceed.

Ms Jessica Tan, Mr Saktiandi and Mr Raj Joshua Thomas explained this well. The decision to halt the deal in its current form and the fact that we are here today to debate and approve the amendments to the Insurance Act demonstrate that due process works. It is about coming to Parliament after putting together the full picture, working across the whole-of-Government to see what is the overall assessment of how to move forward on this important issue, and then coming to Parliament to present the information and proposals for Parliament's approval.

I wish to thank Ms Tan, Mr Saktiandi and Mr Raj Joshua Thomas, and also other Members for their support in clarifying the facts and, importantly, for showing appreciation to our public officers in MAS and MCCY. As Ms Tan said, they were working hard and they were doing their jobs.

In contrast, WP's Assoc Prof Jamus Lim and Mr Leong Mun Wai from PSP took a different approach. The Members made serious allegations regarding our public officers, regarding our agencies. I do not know why the Members have to take this approach, especially after I had explained what happened on Monday. I had clarified the facts on Monday. Why is it necessary for Mr Leong and Assoc Prof Lim to still want to throw our public officers under the bus? Why is that necessary, Sir?

Sir, I have explained earlier why MAS, when they received the capital reduction plan, needed time to assess, and this was only in mid of July. The officers needed time to go through this plan and because they were not aware of the undertakings and the details of MCCY's exemption that was given earlier. The exemption was gazetted, but the details and the conditions and the undertakings, those were not made public. So, I do not think it is fair for Mr Leong to expect that the MAS team would automatically know what those details are, when those details are not made public.

It was only after we had a fuller understanding of the set of issues after the 6 August Parliament Sitting that the MAS team saw that there could be a connection to what MCCY was looking at. And then they surfaced this to the Board and then we shared it with MCCY.

So, I hope that Mr Leong and Assoc Prof Lim could give our officers some credit, could understand what they were going through and also look at it from their perspective, from their point of view. They were not trying to do something wrong or, as Assoc Prof Lim mentioned, "to lead to multiple breakdowns of communications", or "to work in a siloed manner". That is certainly not what they were trying to do. They were trying their very best to do their work. And when they saw that there was a link, they shared the information. They surfaced it to the Board and then we shared the information with MCCY.

And this is how the Government then came together, across different parts of the Government, taking a whole-of-Government approach, coming to Parliament with this Bill, to seek Parliament's approval. This is the outcome of a whole-of-Government effort.

Mr Leong asked who should be in charge? Should the Cabinet not be in charge? I would like to ask Mr Leong, who do you think made the decision to take this Bill to Parliament, to come to Parliament? It is the Cabinet that decided that we could not allow the deal, in its current form, to proceed and that is why we are bringing this Bill to Parliament for approval.

Mr Deputy Speaker, I would also like to address two other points that Assoc Prof Lim mentioned in his speech earlier. First, he talked about SIRA, or the Significant Investments Review Act. Sir, we have explained this previously – I think Mr Saktiandi mentioned it earlier in his speech – that the purpose of SIRA is to look at Singapore's national security interests. And we will look at whether an entity is a key provider of security-related functions, especially when there are a few or no alternatives and whether it is adequately covered by existing sectorial legislation.

So, there is a rigorous process to decide what goes into SIRA and I hope Assoc Prof Jamus Lim understands that if we are too quick to put many entities under SIRA, that will go against what many other Members have spoken about earlier, that how then do you maintain investor confidence and have a pro-business operating environment? So, we must have a good basis, a good reason, before we decide that something needs to be designated under SIRA.

Assoc Prof Lim was also incorrect to point out that there are no controls if companies, like DBS and Singtel, were to sell their shares. I would urge Assoc Prof Lim to check his facts. MAS would have to approve any changes in significant shareholding for banks, including DBS, and IMDA would have to approve any changes in significant shareholding for telcos like Singtel.

Mr Deputy Speaker, Mr Saktiandi Supaat, Mr Yip Hong Weng, Mr Raj Joshua Thomas and Ms Usha Chandradas sought clarifications on the parameters of the proposed Bill. Mr Saktiandi and Mr Raj Joshua Thomas and, I believe, also Ms He Ting Ru, asked if the Bill only operates prospectively instead of retrospectively and if there would be any issues of retrospective application of the law.

Sir, the Bill does not affect any completed transaction and I would like to clarify that there is no formal application yet by Allianz to obtain effective control and become a substantial shareholder of Income. The contractual terms of the transaction clearly state that it is subject to regulatory approval by MAS. There is, therefore, no retrospective application of the law.

Mr Saktiandi, Ms He Ting Ru, Ms Hazel Poa and Ms Usha asked if the existing sections 26 and 27 of the Insurance Act would already allow whole-of-Government considerations to be taken into account, since the sections provide that MAS may approve an application, if the Authority is satisfied that the criteria are met.

To clarify, MAS takes into account all relevant considerations within the objects of the Insurance Act. There is currently no explicit provision under the Insurance Act for MAS to take into account the views of MCCY, which include questions relating to social mission, in assessing a proposed acquisition of an insurer with co-operative links. The proposed amendment will provide for that. MAS did not expand the scope of sections 26 and 27, as MCCY's views would not be relevant for insurers that are not linked to co-operatives.

And this is important, going back to the earlier point that Mr Mark Lee, Mr Neil Parekh and a few others mentioned, which is, we need to make sure that we still keep our operating environment one that is business-friendly and that investors will have confidence to continue to want to invest in Singapore. I think that is important and that is why we wanted to scope it tightly for this purpose and not have a general clause.

Ms Usha Chandradas also sought clarification on the interpretation of "conduct its business prudently" in the context of Income. Sir, this entails whether such an insurer will continue to be run in a safe and sound manner and safeguard policy-holder interests, consistent with MAS' prudential considerations under the Insurance Act.

To Mr Saktiandi's question on whether there should be a comprehensive summary of various classes and target companies, we do not think it is necessary. The current case involving Income is unique due to its co-operative history and social mission, setting it apart from typical insurers. For standard scenarios, the Insurance Act already clearly outlines the specific regulatory approvals required for such transactions.

Mr Liang Eng Hwa asked whether the proposed capital optimisation measures would weaken the capital adequacy of Income. I would like to first assure Members that MAS requires insurers to maintain, on an ongoing basis, adequate capital to address the risk of its insurance business and activities. As the capital required will increase as business risks increase, insurers may undertake capital optimisation measures, such as reinsurance to reduce the risk retained within the insurer, without shrinking its business or weakening it. This would, then, reduce the regulatory capital required to support the same business.

These measures that free up capital to be returned to shareholders is not an uncommon commercial practice, as Mr Liang has pointed out. And to be clear, in the case of Allianz, they had provided a preliminary business plan to MAS in mid-July regarding the capital reduction. There was no application from Allianz for capital reduction.

Mr Deputy Speaker, I would also like to address a comment that Mr Leong Mun Wai made earlier with regard to the capital reduction plan.

First, I think I have clarified that there was no application from Allianz. They only provided a preliminary business plan to MAS in mid-July. I also clarified on Monday and also today and a few Members have mentioned it as well, that the deal is still subject to MAS regulatory approval. I hope those facts are clear.

I do have an issue with how Mr Leong has described the capital reduction plan as an asset stripping exercise. And I do not think that is a fair description. I think Mr Leong deliberately chose that term and this is not the first time I have heard Mr Leong make unkind remarks towards NTUC.

Sir, NTUC has explained, the Members heard from Senior Minister of State Desmond Tan earlier and also other colleagues from the Labour Movement, that they are entering into this deal with the right intent. They acted in good faith. They wanted to do the right thing. They wanted to strengthen Income, so that Income is in a stronger position to serve its policy-holders and also to fulfil its social mission, because to do good, you must first do well. That was the intent.

We may have differences in views, as Minister Edwin Tong mentioned earlier, with regard to this deal, whether this deal is something that the Government would allow to proceed and we have come to the conclusion that we would not allow this deal to proceed. So, yes, there is a difference in views between what NTUC, NE, Income have put up and what the Government feels is the right way forward, but we do not disagree with the objectives of why we are doing this or why Income is doing this. The purpose of doing this is the right one. It is to strengthen Income and to do well, so that it can do good.

The Members of the Opposition often remind us that just because there are differences in views, it does not mean that we should automatically jump to the conclusion that you have a bad intention. I respect that view, Sir, so I would like to seek their agreement that, in this case, please also apply that consistently; that just because there is a difference in views, in terms of how the proposal is structured, it does not mean that you should conclude that NTUC and NE were doing this without a good intent. That would not be fair to our sisters and brothers from NTUC and NE. [Applause.]

Sir, Minister Edwin Tong has explained why we need this Bill, to give the Government the powers so that our view will prevail. And we do not want the deal in its current form to go through. However, we remain open to Income entering into a new deal, whether with Allianz or with another entity, if the outcome is that this can help to strengthen Income.

Mr Deputy Speaker, this Bill is being tabled and read on a Certificate of Urgency because the proposed deal by Allianz is under active consideration by Income's shareholders. The Bill will allow the Minister-in-charge of MAS to consider the views of the Minister charged with the responsibility of the CSA in applications to obtain effective control or become a substantial shareholder of a licensed insurer that is a co-op, has acquired the business of a co-op or has a substantial shareholder or effective controller that is a co-operative. The Minister-in-charge of MAS can then withhold approval if he considers it in the public interest to do so. The Minister-in-charge of MAS will also take into account prudential considerations under the Insurance Act in making his decision.

The Government has determined that this proposed transaction cannot proceed in its current form. However, we remain supportive of NE's and Income's efforts to look for a strong partner, including with Allianz or another entity, to strengthen Income's capital base and market position. The Government recognises and agrees that Income must do well before it is able to continue doing good on a sustained basis.

Mr Deputy Speaker, I thank Members, once again, for their support for the Bill. I hope I have clarified the concerns raised by Assoc Prof Jamus Lim and Ms He Ting Ru, and I sincerely hope that the WP can support this Bill. [Applause.]