Deputies question ‘hasty’ change to insurance laws in light of the Allianz-Income agreement

SINGAPORE’s urgency to change its insurance laws stems from the fact that German insurer Allianz’s bid for a majority stake in Income Insurance is under “active consideration” by Income shareholders, said the deputy chairman of the Monetary Authority of Singapore (MAS ), Chee Hong Tat, on Wednesday (October 16).

But Members of Parliament (MPs) raised concerns about the haste with which the government moved to change the law and questioned an apparent lack of communication and coordination between the Ministry of Culture, Community and Youth (MCCY) and the MAS.

The Insurance (Amendment) Bill was introduced on Monday on an urgent basis – with the debate taking place just two days later, rather than in the next session of Parliament – ​​as the government seeks to block the Allianz-Income deal from be implemented in its current form.

On Wednesday, Chee stressed that the changes are necessary because insurance cooperatives are “a special category of insurers with a social mission”.

On Monday, Culture, Community and Youth Minister Edwin Tong said the government considered it was “not in the public interest” for the transaction to proceed in its current form. His ministry had learned new details that raised concerns about Income’s ability to continue to fulfill its social mission if the deal went through.

Proposed changes

Opening the debate on the bill on Wednesday, Chee – who is also Minister for Transport and Second Minister for Finance – reiterated that the government has no concerns about the position or suitability of Allianz to acquire a majority stake in Income.

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Instead, the concern lies with the terms and structure of the transaction, especially in the context of Income’s corporatization.

Chee recapped the proposed legal changes. Currently, any person seeking to gain effective control or become a substantial shareholder of a licensed insurer incorporated in Singapore requires prior written approval from MAS.

When evaluating these applications, MAS considers criteria such as the financial strength and track record of the applicant, and whether the applicant is fit and proper. But there is no provision to consider the views of the MCCY.

The government is therefore proposing to change this. The changes will allow the minister responsible for MAS to consider the views of the minister responsible for administering the Co-operative Societies Act (CSA), for applications relating to an insurer that is a co-operative or is linked to a co-operative. .

This is the case of Income, which was originally a cooperative, but became an unlisted business entity two years ago.

At the time, it requested a ministerial exemption from Section 88 of the CSA, which requires liquidated co-operatives to transfer any surplus funds to the Co-operative Societies Liquidation Account, after reimbursing members for their original share capital and unpaid dividends. . The income assured MCCY that its social mission would remain unchanged.

The Insurance (Amendment) Bill, if passed, will allow the minister responsible for the MAS to refuse to approve applications – if this is considered to be in the public interest – after consulting the minister responsible for administering the CSA.

If MAS rejects the application due to such refusal, its decision cannot be appealed.

Furthermore, even when granting approval, the minister responsible for MAS may impose the necessary conditions. Violation of these conditions will be considered an infraction.

MPs’ concerns

But MPs were concerned about the rush to change the laws now.

One point of contention the government flagged was an intended capital extraction exercise of S$1.85 billion under the proposed Income-Allianz deal. Tanjong Pagar GRC MP Joan Pereira asked whether this detail could have been shared during the August parliamentary session, when MPs questioned the agreement.

She added that given the nature and value of this agreement, one would expect close coordination between relevant authorities such as MCCY and MAS throughout the entire assessment process.

Similarly, Workers’ Party (WP) MP Jamus Lim asked to what extent MAS knew about Allianz’s capital extraction exercise and why discussions were not held between MAS and MCCY despite the importance of the agreement.

He and his WP colleague He Ting Ru described the bill as a “good faith effort” but said it raises other legal and procedural considerations.

The legislative changes could be seen as hasty and retrospective, they said. Changing laws in the middle of a large real-time transaction could undermine legal and regulatory certainty.

For such deals, parties must engage regulators upfront, before public announcements are made, He said. This is so that parties can identify potential impediments to business, assess the risk of regulatory blockage and resolve these issues through structuring their transactions, she added.

Progress Singapore Party non-constituency MPs Hazel Poa and Leong Mun Wai expressed concerns about the rush of the changes and questioned the lack of transparency and communication in relation to the sale of Income to Allianz.

Poa said he had reservations about hastily amending the Insurance Act to block the deal, saying this approach sets a disturbing precedent.

“To the extent possible, the government should rely on existing laws when evaluating agreements for regulatory approval. This gives investors confidence, here and abroad, that our regulatory framework is stable, although the bill we are debating today is narrow in scope,” she said.

Leong asked why MAS waited before sharing the terms of the proposed transaction and capital reduction plans with MCCY.

He acknowledged that it may not be possible to publicly disclose all the details of a proposed deal with sensitive market information, but said that when information sharing is limited to government agencies, there is no reason to “guard” it.

“A capital reduction exercise should have sounded alarm bells at MAS, even from a prudential point of view,” he said.