MAS to hold Income, Allianz to account to ensure existing insurance policies stay unchanged

The Monetary Authority of Singapore (MAS) will hold Income Insurance and Allianz to account in ensuring that there will be no change to the terms and conditions of existing insurance contracts, should the regulator approve Allianz’s offer to acquire a controlling stake in Income.

“MAS expects Income to fulfil its obligations to all policyholders under the terms of its existing insurance contracts. Allianz has also publicly stated its intent for Income to do so. MAS will hold Income and Allianz to account to these commitments,” said Second Finance Minister and MAS board member Chee Hong Tat in Parliament on Aug 6.

He added that MAS’ regulations and guidance require insurers to maintain sufficient capital reserves and treat customers of participating policies fairly.

Participating policies allow policyholders to share in the profits of the participating fund.

“MAS protects the interests of policyholders by restricting the ratio of profits allocated to shareholders and the type of expenses insurers may charge to the participating fund,” he said.

Mr Chee was responding to questions relating to Allianz’s offer to acquire a 51 per cent stake in Income for $40.58 a share, which values a deal at $2.2 billion.

Should the deal go through, NTUC Enterprise (NE) will retain a substantial stake of up to 49 per cent in Income, depending on how minority shareholders tender their shares. NE now holds a 72.8 per cent stake in Income.

The deal is subject to MAS’ approval.

Mr Chee said that in assessing the offer, which involves a change in substantial shareholder in a Singapore insurer, MAS will consider Allianz’s track record, financial soundness, reputation, as well as fitness and propriety.

For example, MAS will assess if Allianz has the financial capacity to support Income when needed, and the willingness and ability to ensure that insurance operations are well run. Effective systems and controls must also be in place to meet its obligations to policyholders for the long term.

In his reply to Mr Ang Wei Neng’s (West Coast GRC) question on how MAS would assess the long-term financial viability of Income, Mr Chee said the regulator focuses on what is in the best interest of policyholders.

He noted that even though Income is now able to meet its commitments, the concern is whether it will be able to continue meeting its obligations to policyholders and fulfil its social mission of providing affordable insurance in the future.

“NTUC has said they want to retain the social mission. They do not want that to change. The best way to enable them to continue to fulfil their social mission more effectively is to have a strong Income.

“As NTUC has shared, with Allianz coming into this proposed deal, they would have two strong shareholders. Instead of only relying on NE, they could also tap the resources and networks of Allianz.”

Mr Chee said the insurance industry in Singapore has become highly competitive, with more than 50 insurance providers now operating here. In both life and general insurance, Income has a market share of less than 10 per cent based on written premiums.

Mr Chee said fostering a competitive insurance market with financially strong insurers is a key part of MAS’ approach to ensuring that insurers operate sustainably and serve the public well.

“For MAS, our belief is that the best way to protect our policyholders, whether existing or future, is to have a competitive insurance industry and insurers which are well run, which will then provide stability over the longer term and offer choice, offer options and offer competitive rates to policyholders.”

Workers’ Party chief and Leader of the Opposition Pritam Singh (Aljunied GRC) asked whether MAS has queried NE on the basis of its commitment to keeping premiums affordable, given that it will hold a minority share in Income if a deal goes through.

In response, Mr Chee noted that it is not the purview of just Income to offer affordable premiums to different segments of the market, and that other insurers in Singapore are doing so.

“We believe that a competitive market with sufficient competition and sufficient numbers of insurers will allow us to be able to have more insurers step forward to provide products that may serve the needs of different segments in society, including the low-wage segments and the vulnerable segments.”

Ten MPs filed 10 questions on the deal, which has sparked much public debate since it was announced on July 17. During the sitting, nine MPs raised further questions on the issue, including on NE’s and Income’s social mission.

Minister of State for Culture, Community and Youth Alvin Tan said the Government values the role played by NTUC and its social enterprises. He said that NTUC Income was established in 1970, and it has provided workers with essential insurance protection at an affordable rate.

But he noted that social enterprises must themselves be sustainable. 

“If a social enterprise cannot sustain itself financially, and government subsidy is needed to prop up the entity, then we will have to consider whether such a service ought to be provided by the Government,” he said.

“Taxpayers must also be prepared to pay their share of taxes to fund the service,” he added.

Turning to Income, Mr Tan said: “We need to first appreciate that Income today operates in a very different competitive and regulatory environment.”

He added: “The current situation for Income cannot be sustained.” He said that Income’s capital buffers have repeatedly come under pressure, and while NE has supported Income with capital injections, NE cannot do this on its own.

“That is why Income sought to corporatise in 2022, so that it could consider more options to access more capital.”

On the 2022 corporatisation exercise, Mr Tan said that the Registry of Co-operative Societies is satisfied that due process was followed.

The registry had advised that it was a matter for Income and its members to collectively determine and resolve, and Income’s members voted overwhelmingly in favour of the move.

Mr Tan said that Income’s social mission “has already evolved” and it offers only two low-cost insurance options currently. He added that NTUC and Income have given their assurance to keep premiums affordable for the insurer’s low-cost schemes for union members.

He noted that NTUC secretary-general Ng Chee Meng issued a statement on Aug 5 reaffirming the labour movement’s full commitment to its social mission. “NTUC has stated publicly that Income will uphold this commitment. NTUC has also stated publicly that NTUC’s social mission will not change,” said Mr Tan.

On whether the deal will lead to job cuts, Mr Chee said it is too premature to discuss the matter.

While MAS does not directly regulate the employment practices of financial institutions, Mr Chee said that the regulator expects financial institutions to comply with employment laws and guidelines.

“If the workers are not treated fairly... the Ministry of Manpower and NTUC will be able to come in and help to speak up for the workers, just like what NTUC has done in previous cases where there are job losses and the workers were not fairly treated,” he said.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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