Insurance (Corporate Governance) (Amendment) Regulations 2010

No. S 753

Insurance Act

(Chapter 142)

Insurance
(Corporate Governance) (Amendment)
Regulations 2010

In exercise of the powers conferred by section 64 of the Insurance Act, the Monetary Authority of Singapore hereby makes the following Regulations:

Citation and commencement

1. These Regulations may be cited as the Insurance (Corporate Governance) (Amendment) Regulations 2010 and shall come into operation on 9th December 2010.

Amendment of regulation 3

2. Regulation 3(1) of the Insurance (Corporate Governance) Regulations 2005 (G.N. No. S 584/2005) (referred to in these Regulations as the principal Regulations) is amended —

(a)

by inserting, immediately after the definition of “Audit Committee”, the following definition:

“ “board committee” means any of the committees specified in regulation 10 and the Executive Committee referred to in regulation 9;”;

(b)

by deleting the definition of “independent director” and substituting the following definition:

“ “independent director”, in relation to a significant insurer, means a director who —

(a)	is independent from any management and business relationship with the significant insurer;
(b)	is independent from any substantial shareholder of the significant insurer; and
(c)	has not served on the board of the significant insurer for a continuous period of 9 years or longer;”;

(c)

by inserting, immediately after the definition of “Nominating Committee”, the following definition:

“ “principal officer” has the same meaning as in section 31 of the Act;”; and

(d)

by inserting, immediately after the definition of “Remuneration Committee”, the following definition:

“ “Risk Management Committee” means a Risk Management Committee referred to in regulation 16A;”.

Amendment of regulation 6

3. Regulation 6(2) of the principal Regulations is amended by deleting the words “and 16(1)” and substituting the words “, 16(1) and 16A(1)”.

Amendment of regulation 7

4. Regulation 7 of the principal Regulations is amended by deleting the words “or 16(1)” wherever they appear in paragraphs (2) and (3) and substituting in each case the words “, 16(1) or 16A(1)”.

Amendment of regulation 8

5. Regulation 8 of the principal Regulations is amended —

(a)

by deleting paragraphs (1) and (2) and substituting the following paragraphs:

“(1) Subject to paragraphs (2), (3) and (4) and regulations 7(3) and 19, a significant insurer shall have a board of directors comprising at least a majority of directors who are independent directors.

(2) Where a single substantial shareholder holds 50% or more of the share capital or the voting power in a significant insurer, paragraph (1) shall not apply to the significant insurer only if the significant insurer has a board of directors comprising —

(a)	at least a majority of directors who are independent from management and business relationships with the significant insurer; and
(b)	at least one-third of directors who are independent directors.”;

(b)

by deleting the words “14 days of” in paragraph (3)(a) and substituting the words “14 days after”; and

(c)

by inserting, immediately after paragraph (6), the following paragraph:

“(6A) Any significant insurer which contravenes paragraph (3)(a) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000.”.

Amendment of regulation 10

6. Regulation 10 of the principal Regulations is amended —

(a)

by deleting the word “and” at the end of paragraph (1)(b);

(b)

by deleting the full-stop at the end of sub-paragraph (c) of paragraph (1) and substituting the word “; and”, and by inserting immediately thereafter the following sub-paragraph:

“(d)	a Risk Management Committee.”;

(c)

by inserting, immediately after paragraph (1), the following paragraph:

“(1A) A significant insurer shall ensure that every member of each Committee referred to in paragraph (1) shall have unfettered access to information which the significant insurer is in possession of or has access to, for the purposes of carrying out the responsibilities of the Committee concerned.”;

(d)

by deleting the words “a Nominating Committee or a Remuneration Committee” in paragraph (2) and substituting the words “a Nominating Committee, a Remuneration Committee or a Risk Management Committee”;

(e)

by deleting the words “the Nominating Committee or the Remuneration Committee” in paragraph (2)(a) and (b) and substituting in each case the words “the Nominating Committee, the Remuneration Committee or the Risk Management Committee”; and

(f)

by inserting, immediately after the words “paragraph (1)” in paragraph (3), the words “or (1A)”.

Amendment of regulation 11

7. Regulation 11 of the principal Regulations is amended —

(a)

by inserting the word “and” at the end of paragraph (1)(a);

(b)

by deleting sub-paragraphs (b), (c) and (d) of paragraph (1) and substituting the following sub-paragraph:

“(b)	at least a majority of directors (including the chairman of the Nominating Committee) who are independent directors.”;

(c)

by deleting paragraph (2) and substituting the following paragraph:

“(2) Where a single substantial shareholder holds 50% or more of the share capital or the voting power in a significant insurer, paragraph (1)(b) shall not apply to the significant insurer only if the significant insurer has a Nominating Committee comprising —

(a)	at least a majority of directors who are independent from management and business relationships with the significant insurer; and
(b)	at least one-third of directors (including the chairman of the Nominating Committee) who are independent directors.”;

(d)

by deleting paragraph (4) and substituting the following paragraph:

“(4) If a member of the Nominating Committee resigns, ceases to be a director or for any other reason ceases to be a member of the Nominating Committee —

(a)	the significant insurer shall notify the Authority of the event within 14 days after the occurrence of the event; and
(b)	if this results in a breach of any requirement under paragraph (1), the board of directors shall, within 3 months after that event, appoint such number of new members as may be required to rectify the composition of the Nominating Committee in accordance with that requirement.”;

(e)

by inserting, immediately after paragraph (4), the following paragraph:

“(4A) Where before 9th December 2010, a significant insurer has appointed, as the chairman of its Nominating Committee, any person who is not independent from any substantial shareholder of the significant insurer or who has served on the board of the significant insurer for a continuous period of 9 years or longer, the significant insurer shall not be prohibited from re-appointing that person as chairman of the Nominating Committee immediately upon the expiry of the earlier term of appointment.”; and

(f)

by inserting, immediately after paragraph (5), the following paragraph:

“(6) Any significant insurer which contravenes paragraph (4)(a) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000.”.

Amendment of regulation 12

8. Regulation 12 of the principal Regulations is amended —

(a)

by deleting sub-paragraphs (a) and (b) of paragraph (1) and substituting the following sub-paragraphs:

“(a)	each director;
(b)	each member of each board committee;
(c)	the principal officer and deputy principal officer;
(d)	the chief financial officer; and
(e)	the chief risk officer,”;

(b)

by deleting the words “and 16(1)” in paragraph (3)(a) and substituting the words “, 16(1) and 16A(1)”;

(c)

by inserting, immediately after the words “age, experience, capabilities” in paragraph (3)(b), the word “, skills”; and

(d)

by inserting, immediately after paragraph (3), the following paragraph:

“(3A) The Nominating Committee shall review the reasons provided by each of the persons referred to in paragraph (1) for his resignation from his appointment in the significant insurer.”.

Amendment of regulation 13

9. Regulation 13 of the principal Regulations is amended —

(a)

by deleting the word “and” at the end of sub-paragraph (a) of paragraph (2), and by inserting immediately thereafter the following sub-paragraph:

“(aa)

shall review and assess whether each existing director remains qualified for the office using the criteria set out in regulation 12(3); and”;

(b)

by inserting, immediately after the words “a record of its determination” in paragraph (2)(b), the words “and its assessment, respectively”; and

(c)

by deleting the regulation heading and substituting the following regulation heading:

“Determination of independence of directors and assessment of qualification”.

Amendment of regulation 14

10. Regulation 14(1) of the principal Regulations is amended by inserting, immediately after sub-paragraph (a), the following sub-paragraph:

“(aa)

notify the Authority in writing of the review and assessment of each existing director referred to in regulation 13(2)(aa);”.

Amendment of regulation 15

11. Regulation 15 of the principal Regulations is amended —

(a)

by inserting the word “and” at the end of paragraph (1)(a);

(b)

by deleting sub-paragraphs (b), (c) and (d) of paragraph (1) and substituting the following sub-paragraph:

“(b)	at least a majority of directors (including the chairman of the Remuneration Committee) who are independent directors.”;

(c)

by deleting paragraph (2) and substituting the following paragraph:

(a)	at least a majority of directors who are independent from management and business relationships with the significant insurer; and
(b)	at least one-third of directors (including the chairman of the Remuneration Committee) who are independent directors.”;

(d)

by deleting paragraph (3) and substituting the following paragraphs:

“(3) In addition to such other responsibilities as may be determined by the board of directors of the significant insurer, the Remuneration Committee of the significant insurer shall be responsible for —

(a)

recommending a framework for determining the remuneration of the directors of the significant insurer;

(b)

recommending a framework for determining the remuneration of the executive officers of the significant insurer which shall include the following elements and factors in the design and operation of the framework:

(i)

the remuneration package of each executive officer of the significant insurer —

(A)	shall be aligned to the specific job function undertaken by the executive officer and where the executive officer undertakes any of the significant insurer’s control job functions, the remuneration package of that executive officer shall be determined independently of the business functions of the significant insurer;
(B)	shall take into account input from the significant insurer’s control job functions as may be relevant to the specific job function undertaken by the executive officer;
(C)	shall be aligned with the risks that the significant insurer undertakes in its business that is relevant to the specific job function undertaken by the executive officer;
(D)	shall be sensitive to the time horizon of risks that the significant insurer is exposed to which includes ensuring that variable compensation payments shall not be finalised over short periods of time when risks are realised over long periods of time;
(E)	shall, in relation to the quantum of bonus payable to the executive officer, be linked to his personal performance, the performance of his specific job function as a whole and the overall performance of the significant insurer; and
(F)	shall, in relation to the rationale for the mix of cash, equity and other forms of incentives, be justified; and

(ii)

the size of the bonus pool of the significant insurer shall be linked to the overall performance of the significant insurer;

(c)

recommending the remuneration of each director and executive officer of the significant insurer based on the frameworks referred to in sub-paragraphs (a) and (b), respectively; and

(d)

reviewing, at least once in each year, the remuneration practices of the significant insurer to ensure that they are aligned with the recommendations made in accordance with sub-paragraphs (a), (b) and (c).

(3A) In paragraph (3) —

“business functions” means the job functions in the significant insurer that conduct risk-taking activities in relation to the business of the significant insurer;

“control job functions” means the following job functions:

(a)	risk control and management;
(b)	finance;
(c)	compliance;
(d)	internal audit;
(e)	human resources;
(f)	actuarial; and
(g)	risk control related back office operations.”;

(e)

by deleting paragraph (5) and substituting the following paragraph:

“(5) If a member of the Remuneration Committee resigns, ceases to be a director or for any other reason ceases to be a member of the Remuneration Committee —

(a)	the significant insurer shall notify the Authority of the event within 14 days after the occurrence of the event; and
(b)	if this results in a breach of any requirement under paragraph (1), the board of directors shall, within 3 months after that event, appoint such number of new members as may be required to rectify the composition of the Remuneration Committee in accordance with that requirement.”;

(f)

by deleting paragraph (6) and substituting the following paragraph:

“(6) Where before 9th December 2010, a significant insurer has appointed, as the chairman of its Remuneration Committee, any person who is not an independent director, the significant insurer shall not be prohibited from re-appointing that person as chairman of the Remuneration Committee immediately upon the expiry of the earlier term of appointment.”; and

(g)

by inserting, immediately after paragraph (7), the following paragraph:

“(8) Any significant insurer which contravenes paragraph (5)(a) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000.”.

Amendment of regulation 16

12. Regulation 16 of the principal Regulations is amended —

(a)

by deleting paragraph (4) and substituting the following paragraph:

“(4) If a member of the Audit Committee resigns, ceases to be a director or for any other reason ceases to be a member of the Audit Committee —

(a)	the significant insurer shall notify the Authority of the event within 14 days after the occurrence of the event; and
(b)	if this results in a breach of any requirement under paragraph (1), the board of directors shall, within 3 months after that event, appoint such number of new members as may be required to rectify the composition of the Audit Committee in accordance with that requirement.”; and

(b)

by inserting, immediately after paragraph (5), the following paragraph:

“(6) Any significant insurer which contravenes paragraph (4)(a) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000.”.

New regulation 16A

13. The principal Regulations are amended by inserting, immediately after regulation 16, the following regulation:

“Risk Management Committee

16A.—(1) Subject to paragraph (4) and regulations 7(3) and 19, a significant insurer shall have a Risk Management Committee comprising —

(a)	at least 3 members of the board of directors of the significant insurer; and
(b)	at least a majority of directors (including the chairman of the Risk Management Committee) who are non-executive directors.

(2) The Risk Management Committee shall, in addition to such other responsibilities as may be determined by the board of directors, be responsible for overseeing —

(a)	the establishment and the operation of an independent risk management system for managing risks on an enterprise-wide basis; and
(b)	the adequacy of the risk management function of the significant insurer, including ensuring that it is sufficiently resourced to monitor risk by the various risk categories and that it has appropriate independent reporting lines.

(3) The Risk Management Committee shall maintain records of all its meetings.

(4) If a member of the Risk Management Committee resigns, ceases to be a director or for any other reason ceases to be a member of the Risk Management Committee —

(a)	the significant insurer shall notify the Authority of the event within 14 days after the occurrence of the event; and
(b)	if this results in a breach of any requirement under paragraph (1), the board of directors shall, within 3 months after that event, appoint such number of new members as may be required to rectify the composition of the Risk Management Committee in accordance with that requirement.

(5) Any significant insurer which contravenes paragraph (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000 and, in the case of a continuing offence, to a further fine not exceeding $2,500 for every day or part thereof during which the offence continues after conviction.

(6) Any significant insurer which contravenes paragraph (4)(a) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $25,000.”.

Amendment of regulation 17

14. Regulation 17 of the principal Regulations is amended —

(a)

by deleting the word “and” at the end of paragraph (1)(a);

(b)

by deleting the full-stop at the end of paragraph (1)(b) and substituting a semi-colon, and by inserting immediately thereafter the following paragraphs:

“(c)	the chief financial officer; and
(d)	the chief risk officer.”; and

(c)

by inserting, immediately after paragraph (2), the following paragraph:

“(2A) For the purposes of paragraph (1)(c) and (d), a significant insurer which has appointed any person as its chief financial officer or chief risk officer immediately before 9th December 2010 shall be deemed to have obtained the prior approval of the Authority for the respective appointments —

(a)	for a period of 3 months from the date on which the significant insurer holds or is required by law to hold its annual general meeting for the year 2011; or
(b)	if, before the expiry of the period referred to in sub-paragraph (a), the significant insurer applies for the approval of the Authority for the respective appointments, until the date on which the approval is given or the application for approval is refused,

whichever is later.”.

Amendment of regulation 18

15. Regulation 18 of the principal Regulations is amended by deleting paragraph (1) and substituting the following paragraph:

“(1) A significant insurer shall not appoint any of the following persons as the chairman of its board of directors:

(a)	any of its executive directors;
(b)	any person who is a member of the immediate family of the principal officer of the significant insurer.”.

Amendment of regulation 19

16. Regulation 19 of the principal Regulations is amended —

(a)	by deleting the words “and 16(1)” in paragraph (1) and substituting the words “, 16(1) and 16A(1)”;
(b)	by deleting the words “14 days of” in paragraph (2) and substituting the words “14 days after”;
(c)	by deleting the words “3 months of” in paragraph (2)(b) and substituting the words “3 months after”;
(d)	by deleting the words “or 16(1)” in paragraphs (2)(b) and (3)(b) and substituting in each case the words “, 16(1) or 16A(1)”; and
(e)	by deleting the words “3 months from” in paragraph (3)(b) and substituting the words “3 months after”.

Deletion of regulation 20

17. Regulation 20 of the principal Regulations is deleted.

Savings and transitional provisions

18.—(1) Subject to paragraph (2), these Regulations shall not apply to a significant insurer which carried on insurance business in Singapore immediately before 9th December 2010 for the period from that date to the date on which the annual general meeting of the significant insurer is held in 2011.

(2) Regulations 2(b), 5(a), 7(a), (b), (c) and (e) and 11(a), (b), (c) and (f) shall not apply to a significant insurer which carried on insurance business in Singapore immediately before 9th December 2010 for the period from that date to the date on which the annual general meeting of the significant insurer is held in 2012.

(3) During the period referred to in paragraph (1) or (2), as the case may be, the significant insurer referred to in that paragraph shall continue to comply with the principal Regulations that are applicable to it and in force immediately before 9th December 2010.

Made this 7th day of December 2010.

TEO SWEE LIAN

Acting Managing Director,
Monetary Authority of Singapore.

[ID 05.1 v.32; AG/LLRD/SL/142/2010/5 Vol. 1]

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