PART V
DETERMINATION OF LIABILITIES
Determination of liabilities
20.—(1)  Subject to this Part, the amount of liabilities of an insurer shall be determined in accordance with generally accepted accounting concepts, bases and policies or other generally accepted methods appropriate for insurers.
(2)  In determining the amount of liabilities under paragraph (1), all contingent and prospective liabilities shall be taken into account but not liabilities in respect of share capital.
(2A)  In respect of 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 section 37(1)(b) of the Act.
(3)  The amount of unearned premium reserves in respect of general business shall be —
(a)subject to sub-paragraphs (b), (c) and (d), an amount calculated on a basis not less accurate than the 1/24th method;
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(b)in the case of direct insurance business relating to cargo policies, at the election of the insurer, 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;
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(c)in the case of reinsurance business, at the election of the insurer, an amount not less than 25% of the premiums in the case of marine and aviation policies or 40% of the premiums in other cases or an amount calculated on a basis not less accurate than the 1/24th method; and
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(d)calculated —
(i)where the 1/24th method or some other more accurate method is used, on premiums reduced by the actual commissions payable; or
(ii)in any other case, on premiums without any deduction of commissions payable therefrom.
(4)  For the purposes of paragraph (3) —
“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 vessel 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 net amount of the premiums receivable in the accounting period after deduction of return premiums and payments in respect of reinsurances or retrocessions, except that no deduction shall be made in respect of reinsurances other than reinsurances with a registered insurer or insurer authorised under the Act and reinsurances of special risks, unless the deduction is made against a reinsurer’s deposit equivalent to the reserve calculated in accordance with paragraph (3).
(5)  In the valuation of the life policies of an insurer, no deduction shall be made for reinsurances other than reinsurances with a registered insurer, except against reinsurer’s deposits, and a deduction against a reinsurer’s deposit shall be limited so that the value of the liabilities deducted does not exceed the amount of the deposit.
(6)  For the purposes of this regulation —
(a)a deduction may be made against a reinsurer’s deposit only where the following conditions are satisfied:
(i)the deposit is held by the insurer as security for the whole of the reinsurer’s liabilities under the reinsurances to which it relates;
(ii)the reinsurer may not withdraw the deposit while any such liabilities is secured thereon, nor reduce it otherwise than in the event of and in proportion to a reduction in those liabilities; and
(iii)the deposit relates only to the insurer’s life business and the deduction is of liabilities secured thereon or, as the case may be, the deposit relates only to the insurer’s general business and the deduction is of premiums paid in respect of liabilities which are or were secured thereon;
(b)any arrangement made by an insurer whereby the insurer treats liabilities of a branch in Singapore in respect of any policy as liabilities in whole or in part of a branch outside Singapore shall be regarded as a reinsurance of those liabilities as if the branches were separate insurers and the arrangement were a contract between them, and no reinsurer’s deposit retained by the branch in Singapore under any such arrangement shall be released by that branch except in accordance with the arrangement and for the purpose of this paragraph, an insurer’s head office is to be treated as included in the expression “branch”; and
(c)reinsurances of special risks shall comprise only —
(i)reinsurances of liabilities under a marine and aviation policy, being liabilities which consist of or include those arising from the insurance of a marine hull or aircraft hull; and
(ii)reinsurances of any other risk which by reason of its exceptional nature and amount the Authority permits to be treated as a special risk,
and notwithstanding that the reinsurer’s liabilities in respect of such reinsurance are or were secured in whole or in part by a reinsurer’s deposit, no deduction made with reference to the reinsurance shall be treated as a deduction against the deposit.
(7)  The determination of the amount of liabilities in respect of life policies of an insurer (other than liabilities which have fallen due for payment before the valuation date) shall be made on actuarial principles and shall make proper provision for all liabilities on prudent assumptions in regard to the relevant factors.
(8)  In any case the amount mentioned in paragraph (7) shall not in the aggregate be less than the amount calculated on the minimum basis; and in the case of the life business of the insurer in a country outside Singapore the amount shall not be less than is required by the law of the country.
(9)  Paragraph (2A) shall not affect any statements of account which an insurer is required to lodge with the Authority in respect of any accounting period before the year 2002.
(10)  In this regulation and regulation 20A —
“claims liabilities” means the obligation, whether contractual or otherwise, to make future payments in relation to all claims that have been incurred as at balance-sheet date and includes reserves for claims reported, claims incurred but not reported, claims incurred but not enough reported and direct and indirect claims expenses;
“premium deficiency reserves” means the reserves for the expected loss on unexpired policies after taking into consideration all benefits, claims, claims adjustment expenses, acquisition cost, maintenance costs, and policyholders’experience participation, and shall be calculated net of reinsurance;
“premium liabilities” means the reserves for unexpired risks and includes liabilities for all benefits, claims and expenses, acquisition costs, maintenance costs and policyholders’ experience participation to be incurred after the end of the particular accounting period on which the actuarial investigation is conducted;
“reserves for unexpired risks” shall be the sum of unearned premium reserves and premium deficiency reserves.
Valuation of liabilities of general business
20A.—(1)  In determining the amount of insurance policy liabilities in respect of the general business of an insurer under section 37(1)(b) of the Act, the actuary shall 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 75 per cent level of sufficiency.
(2)  For the purposes of paragraph (1)(a), the value of premium liabilities and claims liabilities shall be estimated for each line of business set out in Form 7 of the First Schedule to the Insurance (Accounts and Statements) Regulations (Rg 2).
(3)  For the purposes of paragraph (1), the insurance policy liabilities shall, subject to paragraph (4), be determined by the actuary either —
(a)on a gross basis, in which case a separate estimate of the reinsurance recoveries shall also be determined; or
(b)on a net of reinsurance recoveries basis.
(4)  Notwithstanding anything in paragraph (3), if there have been significant changes in the reinsurance arrangements, or if the outstanding reinsurance recoveries have a material impact on the actuary’s estimate of the value of the liabilities, the insurance policy liabilities shall be determined on both gross and net of reinsurance recoveries bases.
(5)  Without prejudice to any other factor that the actuary may consider necessary, the actuary shall, in determining insurance policy liabilities under paragraph (1), take into account the following:
(a)the probability of recovery of outstanding reinsurance recoveries; and
(b)the presence of non-reinsurance recoveries such as salvage and subrogation.
(6)  For the purposes of section 37(1)(c) of the Act, the actuary shall include in the actuarial report, each of the values as are required to be estimated under this regulation.
Determination of liabilities on establishment of offshore insurance fund of insurer
21.—(1)  For the purpose of determining the minimum value of the assets to be allocated by an insurer to an insurance fund under section 17(15) of the Act, the amount of the insurer’s liability in respect of the policies registered or required to be registered in the insurer’s register of offshore policies as at its establishment shall be determined in accordance with paragraphs (2) and (3).
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(2)  In respect of policies belonging to the insurer’s life business, prospective liabilities shall be valued as for a statutory valuation at the day preceding the date of the establishment of the register, and in the case of life policies on the minimum basis, and in other cases on a basis approved by the Authority; and there shall be added to the amount of those liabilities any amounts due and unpaid under those policies.
(3)  In respect of policies belonging to the insurer’s general business, prospective liabilities shall be taken to be of an amount equal to the reserve for unexpired risks which would be required in respect of those policies in a revenue account lodged with the Authority under the Act for the accounting period ending on the day preceding the date of the establishment of the register; and there shall be added to the amount of those liabilities the amount estimated to be required to provide for claims arising before the end of that period, after allowing for recoveries from reinsurances and for salvage.
Withdrawal from insurance fund in respect of life policy removed from register of Singapore policies
22.—(1)  Where a policy belonging to the insurer’s life business is under section 16(4) of the Act removed from the register of Singapore policies, the maximum amount that may be withdrawn from the insurance fund in respect of that policy shall be an amount equal to the insurer’s liabilities in respect of the policy as at the date of the removal.
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(2)  The said liabilities shall be valued on the basis adopted for the last statutory valuation relating to the insurer’s life business (or, if there has been no such valuation, on the minimum basis in the case of a life policy and on a basis approved by the Authority in other cases) and shall be valued as for a statutory valuation.
Surrender values of life policies
23.—(1)  On the surrender of a life policy under section 49section 60(1) of the Act, the surrender value of the life policy shall be —
(a)in the case of an endowment policy, an amount equal to 80% of the insurer’s liabilities in respect of that policy determined in accordance with paragraph (2); and
(b)in the case of a whole term of life policy, an amount equal to 95% of the insurer’s liabilities in respect of that policy determined in accordance with paragraph (2),
at the date of the surrender.
(2)  For the purposes of paragraph (1), an insurer’s liabilities shall be determined by —
(a)for products introduced on or after 1st January 1994, the minimum valuation basis as in regulation 26(5); and
(b)for products introduced before 1st January 1994, the same method as in the minimum basis, except that the valuation shall be made by using —
(i)the A1924-29 Ultimate Mortality Table for both male and female lives; and
(ii)a rate of interest of 4% per annum.
(3)  Notwithstanding paragraph (1), the Authority may allow, in any particular case or in relation to any particular type of life policies, the surrender values of such policies to be calculated on a basis different from that specified in paragraph (1).
Amount of paid-up policy to be obtained in exchange for life policy
24.—(1)  On the exchange of a life policy under section 60(3) of the Act for a paid-up policy, the paid-up policy shall be for the amount determined, as at the date of exchange, by the following formula:
 
A
 
 
 
 
B
 
 
 
 
Where
A is the surrender value in dollars of the policy exchanged, less any sums due under the policy to the insurer; and
 
B is the value of an insurer’s liabilities in respect of a paid-up policy for one dollar payable on the like contingencies as the policy moneys under the policy exchanged.
(2)  The surrender value referred to in the formula in paragraph (1) shall be calculated in the manner specified under regulation 23 for surrenders under section 60(1) of the Act, and the liabilities referred to in that formula shall be valued on the basis as prescribed in regulation 23(2).
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Determination of liabilities in connection with winding up
25.—(1)  In proceedings under any written law relating to companies for a winding up by the court of an insurer to which this regulation applies, the contingent and prospective liabilities of the insurer in respect of policies shall, in determining whether the insurer is unable to pay its debts, be estimated as follows:
(a)liabilities in respect of policies belonging to the insurer’s life business shall in the case of life policies be valued on the minimum basis, and in other cases on the basis adopted for the last statutory valuation relating to that business; and
(b)subject to paragraph (7), liabilities in respect of policies belonging to the insurer’s general business shall be taken to be of an amount equal to the reserves for unexpired risks on those policies calculated in the manner prescribed under regulation 20(3).
(2)  Where, in any winding up of such an insurer, any liabilities of the insurer in respect of Singapore policies or offshore policies are required to be valued, the liabilities shall be estimated as follows:
(a)liabilities in respect of policies belonging to the insurer’s life business shall be valued on the basis adopted by the insurer on the last statutory valuation or, if there has been no such valuation, on the minimum basis; and
(b)liabilities in respect of any policy belonging to the insurer’s general business shall be taken to be of an amount equal to the reserves for unexpired risks on that policy calculated in the manner prescribed under regulation 20(3).
(3)  As regards life policies, paragraph (2) shall have effect subject to the following provisions:
(a)the addition (if any) to the liabilities in respect of any policy which is attributable to the adoption of a basis other than the minimum basis shall not rank for the purpose of proof against the assets of the life fund, except after payment in full of the liabilities and expenses to which the fund is applicable according to a valuation made on the minimum basis; and
(b)if there is an available surplus in the life fund, the liabilities in respect of participating policies shall, subject to paragraph (4), be increased so as to allocate to those policies such part of the surplus as is proportionate to the bonuses of the 10 years preceding the commencement of the winding up.
(4)  For the purposes of paragraph (3)(b), the part of the surplus proportionate to the bonuses of the said 10 years is the proportion which the amounts allocated out of surpluses in those 10 years by way of bonus to participating policies bear to the total of the amounts so allocated and of the amounts withdrawn from the fund in those years out of surpluses; but if it appears to the court that by reason of special circumstances an increase which would otherwise be made under paragraph (3)(b) in the liabilities in respect of any policy would be inequitable, the court may order that there shall be no increase or a lesser increase.
(5)  For the purposes of paragraph (3), “life fund” means an insurance fund maintained under the Act in respect of the insurer’s life business, including assets comprised in the deposit so maintained which do not form part of the fund except in a winding up and after allocation of such assets to the fund by the Authority under section 17(13) of the Act.
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(6)  For the purposes of paragraph (3)(b), there is an available surplus in the life fund if, but only if, after taking account of sums recovered from reinsurers, the fund is more than sufficient without recourse to the said assets to meet the liabilities and expenses to which it is applicable.
(7)  Where an insurer’s liabilities in respect of policies belonging to the insurer’s general business include the making of periodical payments in respect of an event occurring before the date as at which the liabilities are to be estimated under paragraph (1) or (2), then to the amount so determined there shall be added in respect of those payments such amount as would be taken to be their value for purposes of proof in winding up to which this regulation does not apply.
(8)  This regulation shall apply to any registered insurer and to any Singapore insurer which has ceased to be so registered but remains under any liability in respect of Singapore policies or offshore policies.
Determination of liabilities of life policies on minimum basis
26.—(1)  Where by these Regulations the liabilities of an insurer in respect of a life policy are required to be determined on the minimum basis, that shall be taken as requiring a determination in accordance with this regulation.
(2)  The liability in respect of a policy shall be taken as equal to the amount (if any) by which the value as at the valuation date of the reversion in the policy moneys, according to the contingencies on which they are payable, exceeds the adjusted value as at the valuation date of the premiums (if any) payable after that date, according to the contingencies upon which they are respectively payable.
(3)  For the purposes of paragraph (2), the adjusted value of the premiums payable after the valuation date is their actual value adjusted —
(a)by assuming that the policy provides only for such premiums as are sufficient to provide for the risk incurred by the insurer in issuing it, without provision for bonuses, office expenses or other charges; and
(b)where the premiums are payable for a whole life insurance, endowment insurance or deferred annuity (with or without other benefits) by making whichever of the further adjustments stated in paragraph (4) will produce the lower adjusted value.
(4)  The further adjustments mentioned in paragraph (3)(b) are —
(a)to assume that the policy is issued one year after the actual date of its issue (but without thereby postponing the time when the premiums cease or any policy moneys become payable if that time is fixed by reference to the date of issue) and to calculate the premiums referred to in paragraph (3)(a) accordingly; and
(b)to make to the premiums referred to in paragraph (3)(a) such addition as would have at the date of issue of the policy a capitalised value equal to 3% of the policy moneys (taking any annuity at the capitalised value it would have on becoming payable).
(5)  In respect of a policy other than an annuity, the valuation shall be made by using —
(a)the 1992 Commissioner’s Valuation Table for male lives and the 1992 Commissioner’s Valuation Table with a three-year age setback for female lives; and
(b)a rate of interest of 4% per annum.
(6)  In respect of an annuity, the valuation shall be made by using —
(a)the a(90) Ultimate Table rated down 2 years; and
(b)a rate of interest of 5% per annum.
(7)  Where the liabilities in respect of more than one policy are to be valued on the minimum basis, and it is necessary to have regard to the ages of persons on whose lives the policies were issued or to any periods of time connected with the policies, it shall not be necessary to take exact ages and periods so long as the result produced by not doing so is reasonably approximate to that which would be produced by doing so.
(8)  The basis adopted for a statutory valuation shall be deemed to be not less stringent than the minimum basis if the rate of interest used is not greater than the rates specified in paragraph (5) or (6), as applicable, and the mortality table used (if not that specified in paragraph (5) or (6)) is approved by the Authority as being, with the rate of interest which is to be used, likely to result in the liabilities being given a value not less in the aggregate than if valued on the minimum basis.
(9)  Notwithstanding paragraphs (5), (6) and (8), the Authority may allow any insurer to adopt such other basis of statutory valuation approved by the Authority in respect of such description of life policy as specified by the Authority; and for the purposes of these Regulations, such approved basis of valuation shall be deemed to be a valuation on the minimum basis.
References to statutory valuation of life policies
27.—(1)  Any reference in these Regulations to a statutory valuation of an insurer’s liabilities shall be read as a reference to a valuation made for the purposes of section 37 of the Act.
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(2)  Where by these Regulations the liabilities of an insurer in respect of a Singapore policy or offshore policy belonging to the insurer’s life business are required to be valued on a specified basis as for a statutory valuation, the liabilities shall be valued on that basis with the like deduction (if any) for any reinsurance of those liabilities as would be made on a statutory valuation.
(3)  For the purpose of paragraph (2), the total deduction that may be made against a reinsurer’s deposit in respect of the reinsurances secured thereby shall (if the case requires) be apportioned rateably between those reinsurances according to the value of the liabilities reinsured.