Insurance (Financial Guarantee Insurance) (Amendment) Regulations 1999

No. S 360

Insurance Act

(Chapter 142)

Insurance (Financial Guarantee Insurance) (Amendment) Regulations 1999

In exercise of the powers conferred by sections 53 and 66 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 (Financial Guarantee Insurance) (Amendment) Regulations 1999 and shall come into operation on 1st September 1999.

Amendment of regulation 2

2. Regulation 2 of the Insurance (Financial Guarantee Insurance) Regulations (Rg 6) (referred to in these Regulations as the principal Regulations) is amended —

(a)

by deleting the word “insured” in the 3rd line of the definition of “average annual debt service” and substituting the word “guaranteed”;

(b)

by deleting the definition of “financial guarantee insurer” and substituting the following definition:

“ “financial guarantee insurer” means an insurer who is registered under the Act and who is permitted by his registration to carry on the business of issuing financial guarantee insurance policies;”;

(c)

by inserting, immediately after the definition of “government unit”, the following definition:

“ “guaranteed unpaid principal”, in relation to a financial guarantee insurance policy, means the outstanding amount of the principal the payment of which is guaranteed by the policy;”;

(d)

by deleting the word “amount” in the definition of “net exposure”; and

(e)

by deleting the definition of “qualified capital” and substituting the following definition:

“ “qualified capital” means —

(a)

in the case of a company incorporated in Singapore, the shareholders’ equity (paid-up share capital, share premium reserves and retained earnings) and capital on call of the company, and the Reserve Fund maintained by the company under regulation 6; or

(b)

in the case of a company incorporated outside Singapore, the Reserve Fund maintained by the company under regulation 6 and —

(i)

the shareholders’ equity (paid-up share capital, share premium reserves and retained earnings) and capital on call of the company; and

(ii)

such other securities and interests of the company as the Authority may consider to be qualified capital,

reported by the company in its most recent financial statement filed with the authority regulating insurance business in the country or territory in which it is incorporated.”.

Amendment of regulation 3

3. Regulation 3 (2) of the principal Regulations is amended by deleting the words “underwrite any obligation except the following” in the 1st and 2nd lines and substituting the words “issue in Singapore a financial guarantee insurance policy in respect of any obligation other than the following”.

Amendment of regulation 5

4. Regulation 5 (1) of the principal Regulations is amended by inserting, immediately after the words “insurance policy” in the 2nd line, the words “issued by the insurer in Singapore”.

Amendment of regulation 6

5. Regulation 6 of the principal Regulations is amended —

(a)

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

(b)

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

“(b)

after the close of each accounting period, transfer to the Reserve Fund, out of the net profits earned by the insurer during the accounting period —

(i)	an amount of not less than 50% of the net profits, where that part of the Reserve Fund that relates to all old policies in force during that accounting period is less than or equal to 50% of the total paid-up capital of the insurer;
(ii)	an amount of not less than 25% of the net profits, where that part of the Reserve Fund that relates to all old policies in force during that accounting period is more than 50% of, but less than, the total paid-up capital of the insurer; or
(iii)	an amount of not less than 5% of the net profits, where that part of the Reserve Fund that relates to all old policies in force during that accounting period is equal to or more than the total paid-up capital of the insurer; and

(c)

at the end of each accounting period, transfer to the Reserve Fund in respect of every new policy issued by the insurer which is in force during the accounting period —

(i)	a sum equivalent to 3.33% of net premiums written in respect of that policy; or
(ii)	a sum equivalent to the relevant percentage of the guaranteed unpaid principal under that policy, net of reinsurance,

whichever is the higher.”;

(c)

by deleting the words “maintaining the necessary amount for the Reserve Fund” in the 4th and 5th lines of paragraph (2) and substituting the words “such amount in the Reserve Fund as is required to be maintained by virtue of paragraph (1)(b)”; and

(d)

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

“(3) A financial guarantee insurer shall not be required to make the transfer to the Reserve Fund under paragraph (1)(c) at the end of an accounting period if that part of the Reserve Fund that relates to new policies is equal to or more than 4 times the highest of —

(a)	the amount of the total net premiums written in respect of all new policies in force during that accounting period;
(b)	the amount of the total net premiums written in respect of all new policies in force in the preceding accounting period; and
(c)	the amount of the total net premiums written in respect of all new policies in force in the accounting period which precedes the accounting period referred to in sub-paragraph (b).

(4) Where the total net claims paid by a financial guarantee insurer during an accounting period in respect of new policies issued by the insurer exceed 80% of the total net premiums written in respect of all new policies issued by the insurer which are in force during that accounting period, the insurer may withdraw from that part of the Reserve Fund maintained by the insurer that relates to new policies an amount which is no greater than the difference between the total net claims paid and the total net premiums written.

(5) In this regulation —

“net claims paid”, in relation to a new policy, means the amount of the claims paid pursuant to the policy after deducting all amounts received or which are receivable pursuant to a reinsurance policy;

“net premiums written”, in relation to a new policy, means the amount of premiums received pursuant to that policy after deducting all returned premiums and all payments payable pursuant to a reinsurance policy;

“new policy” means a financial guarantee insurance policy issued on or after 1st September 1999 in Singapore;

“old policy” means a financial guarantee insurance policy issued before 1st September 1999 in Singapore;

“relevant percentage”, in relation to the guaranteed unpaid principal under a new policy, means —

(a)	0.037% of the guaranteed unpaid principal where the policy is issued in respect of a government obligation which is of investment grade;
(b)	0.057% of the guaranteed unpaid principal where the policy is issued in respect of a government obligation which is not of investment grade;
(c)	0.067% of the guaranteed unpaid principal where the policy is issued in respect of an infrastructure obligation which is of investment grade;
(d)	0.167% of the guaranteed unpaid principal where the policy is issued in respect of an infrastructure obligation which is not of investment grade;
(e)	0.100% of the guaranteed unpaid principal where the policy is issued in respect of any financial obligation, other than a government or infrastructure obligation, which is of investment grade; or
(f)	0.167% of the guaranteed unpaid principal where the policy is issued in respect of any financial obligation, other than a government or infrastructure obligation, which is not of investment grade.

(6) For the purposes of the definition of “relevant percentage” in paragraph (5), an obligation is of investment grade if, as at the end of the accounting period in question, it is in one of the top 4 generic lettered rating classifications (or their equivalent) awarded by an internationally recognised credit rating agency.”.

Amendment of regulation 8

6. Regulation 8 of the principal Regulations is amended by inserting, immediately after the word “Act” at the end thereof, the words “in respect of financial guarantee insurance policies issued by him”.

Made this 18th day of August 1999.

KOH YONG GUAN

Managing Director,
Monetary Authority of Singapore.

[ID 09.8 V2; AG/LEG/SL/142/96/1 Vol. 1]

Search within Legislation