1.1 Market Structure and Industry Participants

1.1 Market Structure and Industry Participants

Quick Summary: Singapore's market has buyers (individuals and businesses), intermediaries (agents and brokers) and sellers (insurers), backed by reinsurers. The Monetary Authority of Singapore (MAS) licenses insurers under the Insurance Act 1966 as direct insurers, reinsurers or captive insurers. Other carriers, such as authorised reinsurers and the Lloyd's Asia Scheme, take part in the market under separate rules.

Why Market Structure Matters for BCP

BCP questions often describe a party and ask what role it plays: who carries the risk, who arranges the cover, and who protects the carrier. If you can place each organisation correctly, many legal questions become easier. An agent's knowledge binds an insurer because the agent acts for the insurer. A reinsurer's failure does not reduce what the direct insurer owes its policyholder.

The Sellers: Licensed Insurers

MAS licenses insurers in three broad categories.

Direct Insurers

Direct insurers deal with the public and with businesses:

• Direct life insurers write life policies and long-term accident and health policies.
• Direct general insurers write all other business, such as motor, property, liability, travel, marine and short-term accident and health cover. This group includes specialist insurers that write marine mutual, trade credit and political risk, or financial guarantee business.
• Direct composite insurers are licensed to write both life and general business.

Reinsurers

Reinsurers are licensed to write life and/or general reinsurance. They may not write direct business; they only accept all or part of risks written by other insurers. Reinsurers also include special purpose reinsurance vehicles, which transfer insurance risk to capital-market investors through securitisation.

Captive Insurers

A captive insurer is licensed to write business that consists principally of the risks of its related corporations. A multinational group may set up a Singapore captive to retain predictable losses, smooth its insurance costs and buy reinsurance directly. Singapore is one of Asia's established captive domiciles.

Other Carriers in the Market

The Lloyd's Asia Scheme operates under Part 2A of the Insurance Act, and MAS describes it as the only foreign insurer scheme currently in Singapore.

Locally Incorporated Insurers and Foreign Branches

Some licensed insurers are companies incorporated in Singapore, with their own share capital and boards. Others are branches of overseas insurers. A branch is not a separate legal person; it is part of the foreign company. MAS still licenses and supervises the branch, which must meet Singapore's capital, governance and conduct requirements for its Singapore business. MAS's Policy Owners' Protection Scheme rules also make branches of foreign direct insurers members unless MAS exempts them.

The Buyers

General insurance buyers fall into two groups, and the distinction recurs throughout the syllabus.

Personal Lines (Individuals)

Individuals buy motor, home (structure and contents), travel, personal accident, personal liability, foreign domestic worker, pet and similar covers. Some purchases are compulsory. Every motor vehicle used on a road needs third-party cover under the Motor Vehicles (Third-Party Risks and Compensation) Act 1960. Employers of foreign domestic workers must buy personal accident and medical insurance under Ministry of Manpower rules. Individual policyholders benefit from extra protections: the Policy Owners' Protection (PPF) Scheme for specified personal lines (Section 2.2), the Payment Before Cover Warranty (Section 2.3) and access to the Financial Industry Disputes Resolution Centre (FIDReC) (Section 9.3).

Commercial Lines (Businesses)

Businesses buy property and business interruption, public and products liability, work injury compensation, marine cargo and hull, engineering, financial lines (such as directors' and officers' liability and professional indemnity) and cyber cover. Work Injury Compensation (WIC) insurance is compulsory for employers under the Work Injury Compensation Act 2019 for all manual employees and for non-manual employees earning up to S$2,600 a month.

How Premiums Become Protection

Policyholders usually pay premiums at the start of cover, so an insurer always holds money it has not yet "earned". Insurance law requires insurers to keep insurance funds separate from shareholders' money, and actuaries value the liabilities those funds must meet:

• Unearned premium reserve (UPR): the part of premiums written that relates to the unexpired period of cover.
• Outstanding claims reserve: amounts set aside for losses that have been reported but not yet settled.
• Incurred but not reported (IBNR) reserve: an actuarial estimate for losses that have already happened but have not yet been notified.

On top of these reserves, MAS's Risk-Based Capital (RBC 2) framework requires each insurer to hold capital in proportion to the insurance, market, credit and operational risks it runs (Section 2.1).

Summary Table