New Acts

Insurance (Amendment) Act (A41/2001)
The Insurance (Amendment) Aact 2001 was passed in Parliament on 5 October 2001 and, for the most part, has come into force on 8 January 2002. The Insurance (Amendment) Act 2001 amends the Insurance Act (Cap 142) in the following respects:

• to permit the Monetary Authority of Singapore ('the MAS') by regulations to establish any foreign insurer scheme to permit any class, society or association of foreign insurers specified in the scheme to carry on insurance business in Singapore, and to make related amendments to the Societies Act (Cap 311);
• to make consequential amendments arising from the Financial Advisers Act 2001 (A43/2001) ('the FAA') and the repeal of the Insurance Intermediaries Act (Cap 142A), in particular, to provide for the regulation of insurance agents, direct general insurance brokers and all reinsurance brokers under the Act which are currently regulated under the Insurance Intermediaries Act (Cap 142A) (life insurance brokers regulated under the Insurance Intermediaries Act (Cap 142A) will, however, be regulated under the FAA). This amendment has not come into force yet;
• to revise the penalties for offences under the Act. In this regard, a new s 55A has been inserted to provide that where a company or body corporate is convicted of an offence under the Act or any regulations made thereunder (other than an offence consisting in the breach of a duty imposed only on companies and bodies corporate), the penalty that the court may impose is a fine not exceeding two times the maximum amount that the court could, but for the section, impose as a fine for the offence; and
• to make miscellaneous amendments for the better administration of the Act.

In relation to foreign insurers, a new Part IIA (new ss 35A to 35L) has been inserted. New s 35B empowers the MAS by regulations to establish any foreign insurer scheme for the purpose of permitting any member of any class, society or association of foreign insurers specified in the scheme to carry on insurance business in Singapore.

Essentially, where a foreign insurer scheme is established, each member of the class, society or association of foreign insurers specified in the scheme may, in accordance with the terms of the scheme, carry on such insurance business in Singapore as may be prescribed.

New s 35E provides that the Business Registration Act (Cap 32) and the Companies Act (Cap 50) will not apply to any foreign insurer in respect of the carrying on of insurance business in Singapore by the foreign insurer under any foreign insurer scheme, if the foreign insurer is permitted to carry on insurance business in Singapore in accordance with the terms of the foreign insurer scheme.

New s 35G provides that, except as may be provided for in regulations made under s 35L, no person may act as an agent for any foreign insurer carrying on insurance business in Singapore under any foreign insurer scheme, unless that person meets such requirements as may be prescribed. In addition, such an agent must carry out such tasks in relation to the carrying on of insurance business in Singapore by the foreign insurer under the foreign insurer scheme as may be directed by the MAS or as may be prescribed.

New s 35L empowers the MAS to make such regulations as are necessary or expedient for the purpose of carrying out the provisions of the new Part IIA, including regulations on certain specified matters.

New Subsidiary Legislation

Employment (Revised Wage Guidelines) Notification 2002 (S2/2002)
Pursuant to the Employment (Revised Wage Guidelines) Notification 2002, the revised wage guidelines, which may be adopted by an employer to adjust the wage of an employee for the period commencing on 5 December 2001 and ending 31 December 2002, shall be in accordance with the recommendations of the National Wages Council ('NWC') as set out in the Notification.

The NWC recommends severe wage restraint. Although the NWC acknowledges that retrenchments may be inevitable, it is of the view that companies should consider retrenchment only as a last resort, and should instead implement other cost-cutting measures first. In particular, the NWC recommends that companies tap into the many training schemes and incentives put in place by the government to upgrade the capabilities and employability of their workforce, so as to better position themselves to ride the economic recovery.

In order to save jobs, the NWC recommends that for companies whose business, profitability or prospects are adversely affected by the severe economic downturn, they may, in consultation with their union and workers, consider implementing wage freezes or cuts commensurate with their performances and prospects.

The NWC notes that while a cut in the rate of contribution to the Central Provident Fund cannot be ruled out, the government will consider this only if the situation demands it.

Securities Industry (Exemption from ss 24(1) and 25) Regulations 2002 (S8/2002)
The Securities Industry (Exemption from ss 24(1) and 25) Regulations 2002 provides that s 24(1) of the Securities Industry Act (Cap 289) (relating to dealer's licence) and s 25 (relating to dealer's representative licence) shall not have effect in relation to the Central Depository (Pte) Ltd ('the CDP') or a representative of CDP, by reason only of entering into a transaction pursuant to the securities borrowing and lending facility operated by the CDP. The exemptions are subject to conditions specified by the Monetary Authority of Singapore.

It is also provided that s 24(1) of the Securities Industry Act (Cap 289) will not have effect in relation to any person entering into a transaction with CDP or its representatives pursuant to the securities borrowing and lending facility operated by the CDP.

The Securities Industry (Exemption from ss 24(1) and 25) Regulations 2002 are operative from 7 January 2002.

Insurance (Amendment) Regulations 2002 (S16/2002)
The Insurance Regulations have been amended with effect from 8 January 2002.

Regulation 20 is amended with the introduction of a new para 2A which provides that, with regard to the general business of an insurer, the amount of insurance policy liabilities shall not be less than the amount of premium liabilities and claims liabilities as valued by the actuary under the Insurance Act (Cap 142). Paragraph 2A will not affect any statements of account which an insurer is required to lodge with the Monetary Authority of Singapore in respect of any accounting period before the year 2002.

The Insurance Regulations are also amended to include a new reg 20A which provides that, in determining the amount of insurance policy liabilities in respect of the general business of an insurer, the actuary is required to calculate:

(a) for each line of business:

(i) a best estimate of the value of premium liabilities; and
(ii) a best estimate of the value of claims liabilities; and

(b) for each insurance fund established under the Act, an estimate of the provision for adverse deviations that relates to the inherent uncertainty in each of the best estimate values, calculated based on a 75% level of sufficiency.

In determining insurance policy liabilities, the actuary may take into account the following:

• the probability of recovery of outstanding reinsurance recoveries; and
• the presence of non-reinsurance recoveries, such as salvage and subrogation.

Insurance (Exemption for Captive Insurers) Regulations 2002 (S17/2002)
The Insurance (Exemption for Captive Insurers) Regulations 2002 have been operative since 8 January 2002.

The Insurance (Exemption for Captive Insurers) Regulations 2002 exempt captive insurers from several provisions of the Insurance Act (Cap 142) ('the IA') and the Insurance Regulations including the following:

(a) exemption from s 14 of the IA. Section 14 imposes a requirement for a Singapore insurer, while registered in respect of any class of insurance business, to have in respect of that class of business, a deposit with the Monetary Authority of Singapore ('the MAS') of not less than $500,000;
(b) exemption from s 37 of the IA. Section 37 requires a registered insurer to conduct periodic actuarial investigations and to submit reports on such investigations to the MAS;
(c) exemption from s 31(1)(b) of the IA. Section 31(1)(b) permits a registered insurer, which is incorporated or established in Singapore, to appoint a person as director of the insurer only if the MAS is satisfied that the person is a fit and proper person to be so appointed and has given its approval for the appointment. The exemption from s 31(1)(b) is only available if the captive insurer:

(i) notifies the MAS of the appointment of any new director and any change in the appointment of its existing directors as soon as practicable after the appointment or change of appointment; and
(ii) provides the MAS with such information relating to the appointment and change of appointment as the MAS may require;

(d) exemption from s 46 of the IA. Section 46 provides for the establishment and maintenance of a Policy Owners' Protection Fund which is to be used for indemnifying and protecting policy owners and others who have been prejudiced by the inability of registered insurers to meet their liabilities under life policies and compulsory insurance policies issued by them. Pursuant to the exemption,
s 46 does not apply to:

(i) any captive insurer; or
(ii) any policy owner or other person who has been or may be prejudiced by the inability of any captive insurer, to meet its liability under insurance policies issued by it;

(e) exemption from reg 20 of the Insurance Regulations. Regulation 20(2A) will not apply to captive insurers. Regulation 20(2A) provides that, with regard to the general business of an insurer, the amount of insurance policy liabilities shall not be less than the amount of premium liabilities and claims liabilities as valued by the actuary under the IA.

Insurance (Lloyd's Scheme) Regulations 2002 (S19/2002)
The Insurance (Lloyd's Scheme) Regulations 2002 are effective from 8 January 2002.

A member of Lloyd's may carry on general class of insurance business in Singapore if the following conditions are satisfied:

(a) the member authorises the administrator to accept, on the member's behalf, service of notices and legal processes in respect of the carrying on of insurance business in Singapore, including any notice or direction from the MAS to the member;
(b) Lloyd's makes and maintains a deposit of a value of not less than $500,000 with the MAS; and
(c) Lloyd's, not later than 31 July of each year, makes and maintains with the MAS such additional deposit, if any, as is necessary to secure that the aggregate value of the deposit referred to in para (b) is not less than 55% of the premiums received by the members of Lloyd's in respect of Singapore policies issued in the course of carrying on an insurance business in Singapore in the preceding year.

The term 'Lloyd's' refers to the society of underwriters known in the United Kingdom as Lloyd's and incorporated by the Lloyd's Act 1871 of the United Kingdom.

The 'administrator' refers to Lloyd's of London (Asia) Pte Ltd.

The Insurance (Lloyd's Scheme) Regulations 2002 also provides for exemption from certain provisions of the IA (in respect of the carrying on of general class of insurance business in Singapore), if the member of Lloyd's complies with the conditions set out above and is not prohibited from carrying on insurance business in Singapore.

Insurance (Actuaries) Regulations 2002 (S20/2002)
The Insurance (Actuaries) Regulations 2002 are effective from 8 January 2002.

Essentially, the Insurance (Actuaries) Regulations 2002 list the prerequisite qualifications which a person must possess to be an actuary:

(a) for the purposes of the Insurance Act (Cap 142) (other than s 37 of the Insurance Act); or
(b) for the purposes of s 37. Section 37 requires a registered insurer to conduct periodic actuarial investigations and to submit reports on such investigations to the MAS.

The Insurance (Actuaries) Regulations (Rg 5) are revoked.

Companies (Amendment) Regulations 2002 (S27/2002)
The Companies Regulations have been amended with effect from 15 January 2002 for purposes including the following:

• to empower the Registrar of Companies to issue such electronic transaction forms as he thinks fit for the purposes of the Companies Act (Cap 50);
• to provide that where an agent has been engaged for the purposes of incorporating a company, the agent shall confirm in the manner determined by the Registrar: (a) the consent of a person to act as a director; and (b) the consent of a person to act as a secretary. The agent is to file such confirmations electronically with the Registry of Companies; and
• to provide that a person who is qualified to act as a company secretary under s 171(1A) of the Companies Act (Cap 50) shall be qualified to issue the certificate required under s 19(3) of the Companies Act (Cap 50) (certificate of identity of the subscribers to the memorandum and of any persons named in the memorandum of articles as officers of a proposed company).

Income Tax (Industrial Building or Structure) (Amendment) Rules 2002 (S46/2002)
Pursuant to s 18(1)(l) of the Income Tax Act (Cap 134), certain capital allowances are available in respect of buildings or structures used for prescribed purposes as provided for in the Schedule to the Income Tax (Industrial Building or Structure)
Rules (R 5).

With effect for the year of assessment 2002 and subsequent years of assessment, the Schedule to the Income Tax (Industrial Building or Structure) Rules has been amended to include buildings or structures used for the repair or maintenance of aircraft components.

Elizabeth Wong
Allen and Gledhill