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Formal Consolidation |  1998 RevEd
Contingency reserves
6.—(1)  In addition to maintaining loss reserves and unearned premium reserves as required under regulation 20 of the Insurance Regulations (Rg 1), a financial guarantee insurer shall —
(a)maintain a Reserve Fund; and
(b)transfer to the Reserve Fund out of the net profits each year, after due provision has been made for taxation, where the amount of the Reserve Fund is —
(i)less than 50% of the paid-up capital — a sum not less than 50% of the net profits;
(ii)more than 50% of the paid-up capital but less than 100% of the paid-up capital — a sum not less than 25% of the net profits; and
(iii)100% or more of the paid-up capital — a sum not less than 5% of the net profits.
(2)  Where the shareholders’ equity of the financial guarantee insurer exceeds the minimum paid-up capital requirement under regulation 4, the excess amount of the shareholders’ equity shall be treated as a credit towards maintaining the necessary amount for the Reserve Fundso long as the excess amount is not paid out to the shareholders.
[S 360/99 wef 01/09/1999]
Informal Consolidation | Amended S 229/2013
Contingency reserves
6.—(1)  In addition to maintaining claim liabilities and premium liabilities as required under regulation 19 of the Insurance (Valuation and Capital) Regulations 2004 (G.N. No. S 498/2004), a financial guarantee insurer shall —
(a)maintain contingency reserves in each insurance fund established and maintained by the financial guarantee insurer under section 17(1) of the Act; and
(b)at the end of each accounting period and subject to paragraph (2), transfer to the contingency reserves in respect of every financial guarantee insurance 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.
(2)  A financial guarantee insurer shall not be required to make the transfer to the contingency reserves under paragraph (1)(b) at the end of an accounting period if the contingency reserves at the end of that accounting period, but before any transfer under that paragraph is made, is equal to or more than 4 times the highest of the following amounts:
(a)the amount of the total net premiums written in respect of all financial guarantee insurance policies in force during that accounting period;
(b)the amount of the total net premiums written in respect of all financial guarantee insurance policies in force in the preceding accounting period; or
(c)the amount of the total net premiums written in respect of all financial guarantee insurance policies in force in the accounting period which precedes the accounting period referred to in sub-paragraph (b).
(3)  Where the total net claims settled by a financial guarantee insurer during an accounting period in respect of financial guarantee insurance policies issued by the insurer exceed 80% of the total net premiums written in respect of all financial guarantee insurance policies issued by the insurer which are in force during that accounting period, the insurer may withdraw from the contingency reserves maintained by the insurer an amount which is no greater than the difference between the total net claims settled and 80% of the total net premiums written for that accounting period.
(4)  In this regulation —
“net claims settled”, in relation to an accounting period, means the gross claims paid, including any portfolio losses, any increase or decrease (as the case may be) in outstanding claims during the period, and any medical or legal expense incurred directly in settlement of claims paid in the period, net of recoveries from salvages, subrogation and reinsurance business ceded, where applicable;
“net premiums written” means the net amount of premiums after deduction of return premiums and payments in respect of reinsurance business ceded;
“outstanding claims” means the claims which have been approved by the financial guarantee insurer for payment but not yet paid, and includes expenses associated with the settlement of such claims but does not include such claims that are already included in policy liabilities;
“relevant percentage”, in relation to the guaranteed unpaid principal under a financial guarantee insurance 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)0.1% 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.
(5)  For the purposes of the definition of “relevant percentage” in paragraph (4), 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.
[S 802/2004 wef 01/01/2005]