Singapore's lawmakers passed a new law on 16 October, granting the the Minister-in-charge of MAS to have powers to consider the views of the Community Minister in approval processes for deals involving an insurer that is either a co-operative (Co-op) or linked to a Co-op.
The law was amended two days after Minister for Culture, Community and Youth (MCCY) Edwin Tong said in a ministerial statement on 14 October that the Government had decided it would not be in the public interest for a proposed acquisition of a majority stake in Income Insurance to be acquired by global insurer Allianz under then-prevailing terms and conditions.
Urgent basis
On 16 October, Mr Chee Hong Tat, Second Minister for Finance, and deputy chairman of MAS, when moving the amendment Bill for a second reading and speaking on behalf of Mr Gan Kim Yong, deputy Prime Minister and Minister-in-charge of MAS, said, that the Government took steps to amend the Insurance Act on an urgent basis because the proposed transaction is under active consideration by Income’s shareholders.
In his ministerial statement on 14 October, Mr Tong spoke about MCCY’s concerns on the proposed transaction between Allianz Europe (Allianz) and NTUC Enterprise (NE) to enable Allianz to acquire at least a 51% stake in Income Insurance (Income) for S$2.2bn ($1.68bn) from NE which is a holding co-op, and the reasons why it would not be in the public interest for the transaction to proceed.
One concern was over the structure of the deal, particularly the potential S$1.85bn capital return to shareholders, raising questions about how a S$2bn surplus for Income, carried over from corporatisation, would be used.
Mr Tong had explained that when Income proposed the transaction with Allianz, it was to find a strong partner that can complement NE in strengthening Income, so that Income can sustain its social mission. It is important to recognise that NE and Income had acted in good faith and their objective of wanting to go into this deal was to do the right thing, which was to strengthen Income, so that it could do well to continue to do good.
Mr Chee said, “I would also like to reiterate that the Government does not have concerns over Allianz’s standing or suitability to acquire a majority stake in Income. The concern is over the terms and structure of this specific transaction, particularly as seen in the context of the preceding corporatisation exercise. The Government remains supportive of NE’s and Income’s efforts to find a strong partner, with Allianz or other partners, to strengthen Income’s capital base and market position.
He said, “As Income is now a corporate entity, it is no longer subject to the jurisdiction of the Registrar of Co-operative Societies, or Co-ops for short. The deal is still subject to MAS’ approval under the Insurance Act (or IA) for Allianz to become a substantial or controlling shareholder.
“However, the IA does not expressly provide for MAS to consider MCCY’s views in applications where the insurer is either a Co-op or linked to a Co-op. We therefore propose to amend the IA to provide a clear statutory basis for MCCY’s views to be considered in any approval involving such applications.”
Key features of amendment
Mr Chee explained the key features of the legislative amendment. He said that the Insurance Act (under sections 26 and 27) requires a person to seek the prior written approval of MAS to obtain effective control or become a substantial shareholder of a licensed insurer incorporated in Singapore.
When assessing an application, MAS considers a range of criteria on prudential grounds such as the financial strength and track record of the applicant and whether it is fit and proper. This assessment is focused primarily on the suitability of the proposed substantial shareholder or person obtaining effective control.
Given that insurance Co-ops are a special category of insurers with a social mission, the IA is amended to provide for the Minister-in-charge of MAS to consider the views of the Minister responsible for the administration of the Co-operative Societies Act (CSA), and to withhold approval involving such applications if the Minister-in-charge of MAS considers that it is in the public interest to do so. The Minister-in-charge of MAS will also take into account prudential considerations under the IA in making his decision.
The Bill applies specifically to a licensed insurer that is the subject of an application under section 26 or 27 of the IA, where:
a. the licensed insurer is a Co-op;
b. the licensed insurer has acquired the principal business or undertaking of a Co-op; or
c. a Co-op is a substantial shareholder or has effective control of the licensed insurer.
The second and third limbs will apply to Income as it took on the assets of Income Co-op when the latter corporatised, and NE as a Co-op is currently Income’s majority shareholder.
The Bill will allow the Minister-in-charge of MAS to impose conditions for approval involving such applications. It also provides that there will be no avenue for appeals to the Minister in respect of MAS’s decision not to approve an application, on the basis that the Minister has withheld approval.