PART V
VALUATION OF LIABILITIES
Application of this Part
17.  This Part applies to the valuation of any liability of an insurance fund established and maintained under section 17 of the Act.
Valuation of liabilities
18.—(1)  Unless otherwise provided for in this Part, a registered insurer shall value any liability of an insurance fund in accordance with the Accounting Standards and sound actuarial principles.
(2)  The Authority may, by notice in writing to a registered insurer, specify the bases, methodologies and other details of a technical nature to be complied with in relation to the determination of liabilities in respect of a policy and in respect of an insurance fund.
Valuation of liabilities of general business
19.—(1)  A registered insurer shall calculate the liabilities in respect of policies of an insurance fund established and maintained under section 17 of the Act for the general business of the insurer as the sum of —
(a)premium liabilities, which shall be an amount not less than —
(i)the unearned premium reserves of the fund calculated as the aggregate of unearned premium reserves for each policy of the fund determined in the manner provided in paragraph (5); or
(ii)the unexpired risk reserves, calculated as the sum of —
(A)the value of the expected future payments arising from future events insured under policies in force as at the valuation date, including any expense expected to be incurred in administering the policies and settling relevant claims; and
(B)any provision for any adverse deviation from the expected experience, calculated based on the 75 per cent level of sufficiency,
whichever is the higher; and
(b)claim liabilities, which shall be an amount not less than the sum of —
(i)the value of the expected future payments in relation to all claims incurred prior to the valuation date (other than payments which have fallen due for payment before the valuation date), whether or not they have been reported to the insurer, including any expense expected to be incurred in settling those claims; and
(ii)any provision for any adverse deviation from the expected experience, calculated based on the 75 per cent level of sufficiency.
(2)  In determining the unexpired risk reserves referred to in paragraph (1)(a)(ii) and claim liabilities referred to in paragraph (1)(b), a registered insurer shall —
(a)calculate the amount of unexpired risk reserves and claim liabilities as the amount net of reinsurance ceded —
(i)by making separate estimates of the gross claims payments and recoveries from the reinsurance counterparty; and
(ii)by taking into account the likelihood of default by the reinsurance counterparty; and
(b)take into account any non-reinsurance recovery such as salvage and subrogation.
(3)  Where there is no material change in —
(a)the manner in which liabilities are reinsured during the period to which the data used to determine the unexpired risk reserves and claim liabilities relates; and
(b)the manner in which liabilities are reinsured at valuation date,
a registered insurer may, instead of complying with paragraph (2)(a), calculate the amount of unexpired risk reserves and claim liabilities net of reinsurance ceded using data on claims payment that are net of reinsurance.
(4)  A registered insurer shall make separate calculations of the unearned premium reserves, the unexpired risk reserves and the claim liabilities in the manner provided in paragraph (1) for each type of business described in Form 6 in the First Schedule to the Insurance (Accounts and Statements) Regulations 2004 (G.N. No. S 494/2004) that is carried on by the insurer.
(5)  The amount of unearned premium reserves for a policy in respect of general business shall be —
(a)subject to sub-paragraphs (b) and (c) and paragraph (6), an amount calculated on a basis not less accurate than the 1/ 24 th method;
(b)in the case of a direct insurer which underwrites risks relating to cargo policies, an amount not less than 25% of the premiums for those policies or an amount calculated on a basis not less accurate than the 1/ 24 th method; or
(c)in the case of an insurer which carries on the business of reinsurance of liabilities under insurance policies —
(i)an amount not less than 25% of the premiums in the case of marine and aviation policies and 40% of the premiums in other cases; or
(ii)an amount calculated on a basis not less accurate than the 1/24 th method.
(6)  The amount of unearned premium reserves for a policy in respect of general business shall be calculated —
(i)where the 1/24 th method or some other more accurate method is used, using an amount of premiums written which is reduced by the actual commissions payable; or
(ii)in any other case, using an amount of premiums written without any deduction for commissions payable therefrom.
(7)  In paragraph (5) —
“marine and aviation policy” means a policy of insurance —
(a)upon goods, merchandise or property of any description transported on board vessels, aircraft or other means of conveyance, including incidental transit before and after shipment;
(b)upon the freight of, or any other interest in or relating to vessels, aircraft or other means of conveyance;
(c)upon vessels or aircraft, or upon machinery, tackle furniture or equipment of vessels or aircraft;
(d)against damage arising out of or in connection with the use of vessels or aircraft, including third-party risks; or
(e)against risks incidental to the construction, repair or docking of vessels, including third-party risks;
“premiums” means the amount of the premiums written in the accounting period after deducting for any premium refund andany payment in respect of reinsurance and retrocession.
Valuation of liabilities of life business
20.—(1)  Subject to paragraph (4), a registered insurer shall value the liability in respect of a non-participating policy as the value of expected future payments arising from the policy, including any expense that the insurer expects to incur in administering the policy and settling any relevant claims and any provision made for any adverse deviation from the expected experience, less expected future receipts arising from the policy.
(2)  Subject to paragraph (4), a registered insurer shall value the liability in respect of an investment-linked policy as the sum of —
(a)the unit reserves, calculated as the value of the underlying assets backing the units relating to the policy; and
(b)the non-unit reserves, calculated as the value of expected future payments arising from the policy (other than those relating to the unit reserves), including any expense that the insurer expects to incur in administering the policies and settling the relevant claims and any provision made for any adverse deviation from the expected experience, less expected future receipts arising from the policy (other than those relating to the unit reserves).
(3)  Subject to paragraphs (4) and (7), a registered insurer shall value the liability in respect of a participating policy as the sum of —
(a)the value of expected future payments arising from guaranteed benefits of the policy, including any expense that the insurer expects to incur in administering the policies and settling the relevant claims, less expected future receipts arising from guaranteed benefits of the policy; and
(b)the value of expected payments arising from non-guaranteed benefits of the policy and any provision made for any adverse deviation from the expected experience.
(4)  A registered insurer shall not value the liability in respect of any policy to be less than zero, unless there are moneys due to the insurer when the policy is terminated on valuation date, in which event the value of the liability in respect of that policy may be negative to the extent of the amount due to the insurer.
(5)  A registered insurer shall calculate the liability in respect of the policies of a non-participating fund or an investment-linked fund as the sum of the liability in respect of each policy of that fund determined in the manner provided in paragraph (1) or (2), respectively.
(6)  A registered insurer shall calculate the liability in respect of the policies of a participating fund as —
(a)the sum of the liability in respect of each policy of the fund determined in the manner provided in paragraphs (1) and (3);
(b)the minimum condition liability of the fund; or
(c)the value of policy assets of the fund, whichever is the highest.
(7)  Where the liability in respect of the policies of a participating fund determined in the manner provided in paragraph (6) is greater than the sum of the liability in respect of each policy of the fund as determined in the manner provided in paragraphs (1) and (3), the insurer shall make such adjustments as may be necessary to the components for the valuation of the liability in respect of a participating policy referred to in paragraph (3)(b), for all or part of the partici-pating policies of the fund such that the sum of the liability in respect of each policy of the fund equals the value determined in paragraph (6).
Treatment in relation to reinsurance arrangement with head office and branch
21.—(1)  Where a registered insurer incorporated outside Singapore treats the liabilities in respect of any policy of its insurance business in Singapore as liabilities of, or part of the liabilities of, the head office or a branch outside Singapore of the insurer, the insurer may make a deduction in respect of such liabilities, when valuing such liabilities, where the following conditions are satisfied:
(a)there is a written arrangement between the head office or branch outside Singapore and the branch in Singapore, stating that the insurer treats the liabilities of the insurance business of the branch in Singapore as liabilities of, or part of the liabilities of, the head office or branch outside Singapore of the insurer; and
(b)any release of reinsurance deposit retained by the branch in Singapore under any such arrangement is to be released only in accordance with the written arrangement.
(2)  Where a registered insurer makes a deduction in accordance with paragraph (1), the insurer shall —
(a)regard the written arrangement between the branch in Singapore and the head office or branch outside of Singapore as a contract of reinsurance of those liabilities; and
(b)the head office or branch outside Singapore shall be treated as if it were a separate insurer.