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ADDRESSING concerns by Members of Parliament about the hastiness of amending insurance laws, Monetary Authority of Singapore (MAS) deputy chairman Chee Hong Tat said that Singapore “remains committed to upholding our status as an open, rules-based and pro-enterprise business hub”.

The Insurance (Amendment) Bill, passed by Parliament on Wednesday (Oct 16), was tabled on Monday on an urgent basis as the government seeks to block German insurer Allianz’s bid for a majority share in Income Insurance. The debate, featuring 19 speakers and lasting over three hours, took place just two days after the Bill was tabled rather than at the next scheduled Parliament sitting.

MPs raised concerns about the haste of this move in Parliament, and the Workers’ Party (WP) abstained from voting.

Earlier on Wednesday, Chee had said the urgency was because the deal is under “active consideration” by Income’s shareholders.

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, after learning details that raised concerns about Income’s ability to fulfil its social mission if the deal went through.

Proposed changes

Opening the debate on the Bill on Wednesday, Chee – who is also Transport Minister and Second Finance Minister – gave a recap of the proposed legal changes.

Anyone seeking to obtain effective control or become a substantial shareholder of a licensed insurer incorporated in Singapore needs prior written approval from MAS.

In assessing such applications, 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 was 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.

Income 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.

Section 88 requires wound-up co-operatives to transfer any surplus funds to the Co-operative Societies Liquidation Account (CSLA), after reimbursing members for their original share capital and unpaid dividends. Income had assured MCCY that its social mission would remain unchanged.

The Insurance (Amendment) Bill, now passed by the House, will provide for 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.

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.

Tong explained that when MCCY received information on the Allianz-Income deal from MAS, the ministry studied and assessed it before deciding that it is not in the “public interest” to proceed with the deal.

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 said the Bill was a “good-faith effort”, but raises other legal and procedural considerations.

The legislative changes may be seen as “rushed” and “retrospective”, noted He. 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, she pointed out. 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.

People’s Action Party (PAP) MP Jessica Tan, who is also an adviser to the Singapore Insurance Employees’ Union, noted that, given the urgency of this Bill, it is “appropriate that the proposed amendments are scoped and not broad-based, so as not to impact the larger insurance market in Singapore, or cause undue anxiety amongst insurers in an already regulated sector”.

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 that 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 noted.

Bad signal to business community?

Leong asked why MAS had 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 noted.

In response, Chee said that MAS received business projections for cash remittance in mid-July and was in the process of reviewing the information, but did not present this information to the MAS board before the August Parliament sitting as the MAS team was still assessing the proposal.

“After the parliamentary sitting on Aug 6, 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,” he added.

Responding to questions about whether the Bill operates only prospectively rather than “retrospectively”, and if there would be any issues regarding retrospective application of the law, Chee clarified that the Bill “does not affect any completed transaction” and that “there is no formal application yet by Allianz to obtain effective control and become a substantial shareholder”.

In a supplementary question, WP MP Sylvia Lim asked if Chee acknowledged that introducing such a legislative change “sends a very bad signal to the business community about business certainty”.

In response, Chee only reiterated his earlier point that Allianz has yet to make a formal application.

Not seeking “broader powers”

Separately, PAP MP Saktiandi Supaat asked if, instead of enacting the amendment in the proposed Bill, MCCY would be able to exercise effective regulation by imposing relevant conditions in the CSA exemption that was granted to Income in 2022.

This could include MCCY clearing any subsequent change in ownership or stipulating that Income return the surplus of approximately S$2 billion, which it had carried over to its new corporate entity, to CSLA.

“My question is whether any conditions were attached to the exemption for Income to carry over S$2 billion of accumulated surplus to its new corporate form,” he said.

In response, Tong clarified that MCCY is “not seeking broader powers that covers general insurance transactions or a broad remit in nature”.