Insurance (Lloyd’s Asia Scheme) (Amendment) Regulations 2004

No. S 814

Insurance Act

(Chapter 142)

Insurance (Lloyd’s Asia Scheme) (Amendment) Regulations 2004

In exercise of the powers conferred by sections 35B and 35L 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 (Lloyd’s Asia Scheme) (Amendment) Regulations 2004 and shall come into operation on 1st January 2005.

Amendment of regulation 2

2. Regulation 2 of the Insurance (Lloyd’s Asia Scheme) Regulations (Rg 9, 2004 Ed.) (referred to in these Regulations as the principal Regulations) is amended —

(a)

by inserting, immediately after the definition of “accounting period”, the following definition:

“ “Accounting Standards” has the same meaning as in section 4(1) of the Companies Act (Cap. 50);”;

(b)

by inserting, immediately after the definition of “Chain of Security”, the following definition:

“ “collective investment scheme” has the same meaning as in section 2(1)of the Securities and Futures Act (Cap. 289);”;

(c)

by inserting, immediately after the definition of “Council of Lloyd’s”, the following definitions:

“ “counterparty” means any person who is under a financial obligation to the Service Company, as an agent of a syndicate, in respect of the business of the syndicate written by the Service Company;

“debt security” includes any debenture, bond or note;

“electronic record” has the same meaning as in section 2 of the Electronic Transactions Act (Cap. 88);

“equity security” includes any stock, share, depository receipt or unit in a collective investment scheme;”;

(d)

by deleting the words “Lloyd’s Underwriting Agents Byelaw (No. 4 of 1984)” in paragraph (a) of the definition of “managing agent” and substituting the words “Lloyd’s Underwriting Byelaw (No. 2 of 2003)”;

(e)

by inserting, immediately after the words “Lloyd’s Substitute Agents Byelaw (No. 20 of 1983)” in paragraph (b) of the definition of “managing agent”, the words “or the Lloyd’s Underwriting Byelaw (No. 2 of 2003)”;

(f)

by inserting, immediately after the definition of “New Central Fund”, the following definition:

“ “permitted trust outgoings” means —

(a)	in relation to an insurance fund for Singapore policies established under regulation 11 (1)(a), Permitted Singapore Policies Trust Outgoings, as defined in the Lloyd’s Asia (Singapore Policies) Instrument made by the Council of Lloyd’s on 13th February 2002; and
(b)	in relation to an insurance fund for offshore policies established under regulation 11 (1)(b), Permitted Offshore Policies Trust Outgoings, as defined in the Lloyd’s Asia (Offshore Policies) Instrument made by the Council of Lloyd’s on 13th February 2002;”;

(g)

by inserting, immediately after the definition of “premiums trust fund”, the following definitions:

“ “quarter” means any period of 3 months beginning on 1st January, 1st April, 1st July or 1st October of any year;

“reinsurance recoverables” means any amount that a Service Company is entitled to recover on behalf of a syndicate, but has yet to recover, from its reinsurance counterparty in respect of claims that have been paid by the Service Company on behalf of the syndicate;”;

(h)

by inserting, immediately after the definition of “Service Company”, the following definition:

“ “subsidiary” has the same meaning as in section 5 of the Companies Act (Cap. 50);”;

(i)

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

“ “unit”, in relation to a collective investment scheme, has the same meaning as in section 2(1) of the Securities and Futures Act (Cap. 289);”; and

(j)

by deleting the full-stop at the end of the definition of “valid claim” and substituting a semi-colon, and by inserting immediately thereafter the following definition:

“ “valuation date” means the date on which the assets and liabilities of the business of a syndicate written by a Service Company are valued.”.

Amendment of regulation 5

3. Regulation 5 of the principal Regulations is amended by deleting paragraph (2).

Amendment of regulation 6

4. Regulation 6 (3) of the principal Regulations is amended —

(a)

by inserting, immediately after the words “furnish the Authority” in sub-paragraph (a), the words “in writing”;

(b)

by deleting the words “other particulars” in sub-paragraph (a) and substituting the words “other information”; and

(c)

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

“(b)

register the applicant on the date of expiry of the period of 30 days commencing on the day immediately following the day on which the particulars and information referred to in sub-paragraph (a) were furnished to the Authority pursuant to the last request made by the Authority under that sub-paragraph, unless the Authority objects to the registration before that date of expiry.”.

New regulation 6A

5. The principal Regulations are amended by inserting, immediately after regulation 6, the following regulation:

“Duty of Service Company

6A.—(1) No Service Company shall, without the approval of the Authority —

(a)	enter into any contract of insurance on behalf of the members of any syndicate;
(b)	cause or permit any amendment or alteration of its memorandum or articles of association;
(c)	cause or permit any reduction of its paid-up capital;
(d)	cause or permit any significant change in its ownership; or
(e)	participate in any pool business other than pools formed by the Singapore insurance industry to cover special risks.

(2) No Service Company shall write any insurance business, unless it has reason to believe that suitable arrangements for the reinsurance of the business written in Singapore are in place at all times and that the reinsurers are of good security.

(3) Every Service Company shall at all times maintain a surplus of assets over liabilities of not less than $150,000.

(4) Every Service Company shall immediately inform the Authority if —

(a)	it is or is likely to be unable to maintain a surplus of assets over liabilities of $150,000 or to meet its obligations as they fall due;
(b)	it becomes aware that any of the arrangements referred to in paragraph (2) has been, is being or is likely to be rendered inadequate or ineffective; or
(c)	for any accounting period, the permitted trust outgoings of any insurance fund established by it under regulation 11 exceed the premium receipts of that insurance fund.”.

Deletion and substitution of regulation 7

6. Regulation 7 of the principal Regulations is deleted and the following regulation substituted therefor:

“Officers of Service Company

7.—(1) A Service Company shall —

(a)	appoint as its chief executive officer an individual who shall be resident in Singapore; and
(b)	appoint in Singapore at least one underwriter who has at least 6 years (or any shorter period as the Authority may allow) experience in underwriting any specialised risk of a type set out in the First Schedule.

(2) No Service Company shall appoint any person as its chief executive officer or a director unless the Service Company satisfies the Authority that the person is a fit and proper person to be so appointed and has obtained the approval of the Authority.

(3) Where a Service Company has obtained the approval of the Authority to appoint a person as its chief executive officer or director under this regulation, the person may be re-appointed as chief executive officer or director, as the case may be, of the Service Company immediately upon the expiry of the earlier term without the approval of the Authority.

(4) In this regulation, “chief executive officer”, in relation to the Service Company, means any person by whatever name called, employed by the Service Company to be directly responsible for the conduct of the Service Company’s duties and functions in Singapore.”.

Amendment of regulation 11

7. Regulation 11 of the principal Regulations is amended by deleting paragraph (7).

Amendment of regulation 13

8. Regulation 13 of the principal Regulations is amended —

(a)

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

“(1) Every Service Company shall prepare, for each syndicate for which it acts as an agent or, where it acts as an agent for more than one syndicate, those syndicates on a consolidated basis with the approval of the Authority —

(a)	for each accounting period and subject to such modifications or variations as may be agreed to by the Authority, the statements of accounts and other statements for each insurance fund established and maintained under regulation 11 (1) in Forms 1, 2 and 3 in the Fifth Schedule;
(b)	for each accounting period and subject to such modifications or variations as may be agreed to by the Authority, the statements of accounts for each insurance fund established and maintained under regulation 11 (1) in Form 3 (excluding the Notes) in the Fifth Schedule; and
(c)	for each quarter and subject to such modifications or variations as may be agreed to by the Authority, the statements of accounts for each insurance fund established and maintained under regulation 11 (1) in Forms 1, 2 and 3 (excluding the Notes and Annexes) in the Fifth Schedule.

(2) Every Service Company shall have the accounts of each insurance fund audited for each accounting period for which statements of accounts and other statements are prepared in accordance with paragraph (1)(a), and may exclude the Annexes to such statements from the audit.

(2A) In any document which a Service Company is required to prepare in accordance with these Regulations in relation to a syndicate, the value or amount given for an asset or a liability relating to the business of the syndicate written by the Service Company shall be the value or amount of that asset or liability, as the case may be, as determined in accordance with regulations 13A to 13M.”;

(b)

by deleting the words “the directors” in paragraph (3) and substituting the words “2 directors”;

(c)

by deleting the words “Form 1” in paragraph (4) and substituting the words “Form 4”; and

(d)

by deleting the words “Forms 2 and 3” in paragraph (5) and substituting the words “Forms 5 and 6”.

New Parts IIIA and IIIB

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

“PART IIIA

VALUATION OF ASSETS

Application of this Part

13A. This Part applies to the valuation of any asset of an insurance fund established and maintained under regulation 11 (1).

Valuation of assets

13B.—(1) Unless otherwise specified in this Part, a Service Company shall value an asset of an insurance fund in accordance with the Accounting Standards.

(2) The following items shall not be treated as assets of an insurance fund:

(a)	assets comprised in the deposit made and maintained by the administrator under regulation 16; and
(b)	intangible assets, including the goodwill of the syndicate to which the insurance fund relates.

Equity securities

13C.—(1) A Service Company shall value an equity security as follows:

(a)	where it is listed on a securities exchange, at its market value; or
(b)	where it is not listed on any securities exchange, at its net realisable value.

(2) In determining the net realisable value of an equity security which is not listed on a securities exchange, the Service Company shall take into account —

(a)	the amount of consideration it would receive by selling the equity security; and
(b)	the net tangible asset value of the equity security.

Debt securities

13D.—(1) A Service Company shall value a debt security as follows:

(a)	where it is listed on any securities exchange, at its market value; or
(b)	where it is not listed on any securities exchange, at its net realisable value.

(2) In determining the net realisable value of a debt security that is not listed on a securities exchange, the Service Company shall take into account —

(a)	the prevailing interest rate;
(b)	the likelihood of default by the issuer; and
(c)	the cash flows that are expected to arise from the debt security.

Land and buildings

13E.—(1) A Service Company shall value any land or building at its estimated market value.

(2) In estimating the market value of any land or building, the Service Company shall take into account —

(a)	the last available valuation report made by a qualified property valuer;
(b)	the prevailing market for the land or building; and
(c)	any damage or improvement affecting the land or building from the date of the last available valuation report.

(3) A Service Company shall obtain a new valuation from a qualified property valuer —

(a)	when the value of the land or building has been substantially impaired by any event; and
(b)	in any event, at least once every 3 years.

Loans

13F. A Service Company shall value loans made to other persons by aggregating the principal amounts outstanding under all loans less any provision for doubtful debts.

Cash and deposits

13G.—(1) A Service Company shall value any cash or deposit with a financial institution, other than a negotiable certificate of deposit, at the nominal amount of such cash or deposit after deducting any amount deemed uncollectible from the financial institution.

(2) A Service Company shall value a negotiable certificate of deposit at its market value.

Outstanding premiums and agents’ balances

13H. A Service Company shall value the outstanding premiums and agents’ balances by aggregating the principal amounts outstanding after deducting any provision for doubtful debts.

Deposits withheld by cedants

13I. A Service Company shall value deposits withheld by cedants by aggregating the amounts of deposits outstanding after deducting any amount deemed uncollectible from the cedant.

Reinsurance recoverables

13J. A Service Company shall value reinsurance recoverables by aggregating the amounts of reinsurance recoverables outstanding after deducting any provision for doubtful debts.

PART IIIB

VALUATION OF LIABILITIES

Application of this Part

13K. This Part applies to the valuation of any liability of an insurance fund established and maintained under regulation 11 (1).

Valuation of liabilities

13L.—(1) Unless otherwise specified in this Part, a Service Company 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 Service Company, 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

13M.—(1) A Service Company shall calculate the liabilities in respect of policies of an insurance fund established and maintained under regulation 11 (1) for the general business written by the Service Company 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,

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 on or before the valuation date), whether or not they have been reported to the Service Company, including any expense expected to be incurred in settling those claims; and
(ii)	any provision for any adverse deviation from the expected experience.

(2) In determining the unexpired risk reserves referred to in paragraph (1)(a)(ii) and claim liabilities referred to in paragraph (1)(b), a Service Company 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 liabilities 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 Service Company 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 liabilities that are net of reinsurance.

(4) A Service Company 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 3 in the Fifth Schedule that is carried on by the Service Company.

(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 1/24th method;

(b)

in the case of a Service Company 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 1/24th method; or

(c)

in the case of a Service Company 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 1/24th method.

(6) The amount of unearned premium reserves for a policy in respect of general business shall be calculated —

(a)	where the 1/24th method or some other more accurate method is used, using an amount of premiums written which is reduced by the actual commissions payable; or
(b)	in any other case, using an amount of premiums written without any deduction for commissions payable therefrom.

(7) In paragraph (5) —

“marine and aviation policies” means policies 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 and any payment in respect of reinsurance and retrocession.”.

Amendment of regulation 15

10. Regulation 15 of the principal Regulations is amended —

(a)

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

“(1) The administrator shall appoint a chief executive officer who shall be an individual resident in Singapore.

(1A) The administrator shall not appoint any person as its chief executive officer or a director unless the administrator satisfies the Authority that the person is a fit and proper person to be so appointed and has obtained the approval of the Authority.

(1B) Where an administrator has obtained the approval of the Authority to appoint a person as its chief executive officer or director under this regulation, the person may be re-appointed as chief executive officer or director, as the case may be, of the administrator immediately upon the expiry of the earlier term without the approval of the Authority.”;

(b)

by deleting the words “In paragraph (1)” in paragraph (2) and substituting the words “In this regulation”; and

(c)

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

“Officers of administrator”.

Amendment of regulation 16

11. Regulation 16 of the principal Regulations is amended —

(a)	by deleting the words “of a policy owner of a policy issued by a member of Lloyd’s” in paragraph (3) and substituting the words “in respect of a policy issued”; and
(b)	by deleting the words “of a policy owner of a policy issued by a member of Lloyd’s under these Regulations” in paragraph (5).

Deletion and substitution of regulation 17

12. Regulation 17 of the principal Regulations is deleted and the following regulation substituted therefor:

“Letter of credit

17.—(1) Where any transfer of assets of an insurance fund under regulation 11(6) shall cause the claim liabilities of the syndicate concerned in respect of the insurance fund to exceed the available balances in the insurance fund, the administrator shall, prior to such transfer, establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority a letter of credit, the value of which shall be not less than the difference between the claim liabilities and the available balances in the insurance fund.

(2) Where a letter of credit has been established and furnished to the Authority under paragraph (1) in respect of an insurance fund and any subsequent transfer of assets of the insurance fund under regulation 11(6) shall cause the claim liabilities of the syndicate concerned in respect of the insurance fund to exceed the sum of —

(a)	the total value of all letters of credit in respect of the insurance fund which remain in force, if any; and
(b)	the available balances in the insurance fund,

the administrator shall, prior to such transfer —

(i)

establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority a letter of credit, the value of which shall be not less than the difference between the claim liabilities, and the aggregate of the available balances in the insurance fund and the total value of all letters of credit referred to in sub-paragraph (a); or

(ii)

subject to paragraph (5), cancel all letters of credit referred to in sub-paragraph (a), and establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority a letter of credit, the value of which shall be not less than the difference between the claim liabilities and the available balances in the insurance fund.

(3) For the purposes of paragraphs (1) and (2), the claim liabilities of the syndicate in respect of the insurance fund, the available balances in the insurance fund and the value of any letter of credit referred to in paragraph (2) ( a) shall be determined as at the end of the quarter immediately preceding the date of transfer.

(4) Where, as at the end of any quarter, the claim liabilities of any syndicate in respect of an insurance fund exceeds the sum of —

(a)	the total value of all letters of credit in respect of the insurance fund which remain in force, if any; and
(b)	the available balances in the insurance fund,

the administrator shall, within 7 weeks from the last day of that quarter —

(i)	establish and furnish to the Authority, or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority, a letter of credit, the value of which shall be not less than the difference between the claim liabilities, and the aggregate of the available balances in the insurance fund and the total value of all letters of credit referred to in sub-paragraph (a);
(ii)	increase or procure that the Service Company increases, the available balances in the insurance fund by an amount not less than the difference between the claim liabilities, and the aggregate of such available balances and the total value of all letters of credit referred to in sub-paragraph (a); or
(iii)	subject to paragraph (5), cancel all letters of credit referred to in sub-paragraph (a), and establish and furnish to the Authority or procure that the Service Company which maintains the insurance fund establishes and furnishes to the Authority, a letter of credit, the value of which shall be not less than the difference between the claim liabilities and the available balances in the insurance fund.

(5) Any letter of credit required to be furnished to the Authority under paragraph (2)(ii) or (4)(iii) shall be so furnished before any letter of credit referred to in paragraph (2)(a) or (4)(a), as the case may be, is cancelled.

(6) The Authority may call on any letter of credit furnished under paragraph (1), (2) or (4) in respect of a syndicate to satisfy any valid claim in respect of a policy issued under these Regulations, by a Service Company on behalf of that syndicate, which remains unpaid 30 days after the issue of a notice by the Authority under paragraph (7).

(7) Before calling on a letter of credit furnished under paragraph (1), (2) or (4), the Authority shall give the administrator notice in writing of its intention to do so and identify in the notice the letter of credit which is intended to be called upon and the valid claim in respect of which the letter of credit is intended to be applied.

(8) In this regulation, unless the context otherwise requires —

“available balances”, in relation to an insurance fund, means the aggregate amount of cash and deposits in the insurance fund which is not repatriated for the year of account and which is available to meet the claim liabilities of the syndicate concerned;

“letter of credit” means an irrevocable standby letter of credit issued in favour of the Authority by a bank licensed under the Banking Act (Cap. 19) in such form as the Authority may require;

“year of account” means the year to which a risk is allocated and to which all premiums and claims in respect of that risk are attributed, as determined by the calendar year in which the risk is written.”.

Amendment of regulation 21

13. Regulation 21 of the principal Regulations is amended —

(a)

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

“(a)	lodge with the Authority, in accordance with this regulation and regulations 25 and 26, such statements of accounts and other documents provided by each Service Company under regulation 13 (6)(a);”; and

(b)

by deleting the words “referred to in paragraph (1) to be furnished” in paragraph (2) and substituting the words “other than those referred to in paragraph (1)(a) to be furnished in such form and manner and”.

Deletion and substitution of regulations 25 and 26

14. Regulations 25 and 26 of the principal Regulations are deleted and the following regulations substituted therefor:

“Lodgment and signature of returns

25.—(1) Any document to be lodged by the administrator under regulation 21(1)(a) shall be lodged —

(a)	in the case of any document referred to in regulation 13(1)(a), (4) or (5), by sending to the Authority the original and 2 copies of the document; and
(b)	in the case of any document referred to in regulation 13(1), in the form of an electronic record with the Authority through such electronic facility, and in such form and manner, as may be specified by the Authority.

(2) A document to be lodged by the administrator under regulation 21(1)(a) —

(a)	shall be in the English language;
(b)	shall, in the circumstances set out in paragraph (1)(a), be printed or, with the permission of the Authority, produced by other mechanical means approved by it; and
(c)	shall state any monetary amount referred to in Singapore dollars (unless otherwise specified in the relevant form) and the basis of conversion of any other currency into Singapore dollars.

(3) Where, by these Regulations, a document is required to be signed by or on behalf of the chief executive officer of a Service Company, it shall, if not signed by that officer, be signed by an officer of the Service Company who is for the time being notified to the Authority as having authority for the purposes of these Regulations to sign in place of the chief executive officer.

Deadlines for lodgment of returns

26. Unless otherwise allowed by the Authority —

(a)	any document to be lodged in accordance with regulation 25(1)(a) shall be lodged with the Authority within 14 weeks from the last day of the period to which the document relates; and
(b)	any document to be lodged in accordance with regulation 25(1)(b) shall be lodged with the Authority within 3 weeks from the last day of the period to which the document relates.”.

Amendment of First Schedule

15. The First Schedule to the principal Regulations is amended by inserting, immediately after the word “operating” in item (23) in the second column against the class of business “Aviation” in the first column, the words “or otherwise”.

Deletion and substitution of Fifth Schedule

16. The Fifth Schedule to the principal Regulations is deleted and the following Schedule substituted therefor:

Made this 23rd day of December 2004.

KOH YONG GUAN

Managing Director,
Monetary Authority of Singapore.

[ID 05.1 V.31; AG/LEG/SL/142/2002/1 Vol. 6]

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