Regulation for Insurance Brokers in Singapore
The Monetary Authority of Singapore (MAS) mandates the registration of insurance brokers in Singapore. A person who carries on business as any type of insurance broker in Singapore is required to be registered as that specific type of insurance broker, unless he is exempted from registration under Section 35ZN of the Insurance Act, as referred to further on in this article.
Types of Insurance Brokers
The Applicant may be registered as:
- a direct insurance broker (to carry on general business and long-term accident and health policies)
- a general reinsurance broker ( to carry on general reinsurance business)
- a life reinsurance broker ( to carry on life reinsurance business)
- an insurance broker, to carry on any combination of the above)
Criteria for Registration as Insurance Brokers
An applicant must be a company, with minimum financial requirements as follows
Relevant minimum paid-up share capital:
- if registration is sought for 1 Insurance Broking Business-$300,000
- if registration is sought for 2 Insurance Broking Businesses-$600,000
- if registration is sought for 3 Insurance Broking Businesses- $900,000
Application for Registration as Insurance Brokers
The application must be submitted by the entity applying for registration as an insurance broker in the form prescribed by the MAS.
A standalone non-hybrid professional indemnity insurance policy (“PII”) must be taken with the applicable minimum limit of indemnity. The minimum level of indemnity:
- if registration is sought for 1 Insurance Broking Business- $1million
- if registration is sought for 2 Insurance Broking Businesses-$2 million
- if registration is sought for 3 Insurance Broking Businesses-$3 million
The limit of deductible for the first financial year should be not more than 20% of the insurance brokers paid up capital. For the subsequent financial years the limit of deductible should not be more than 20% of the insurance brokers’ net asset value as at the end of its preceding financial year.
Chief Executive Officer (“CEO”) – 5 years of relevant working experience, 3 yrs. of managerial experience in the relevant field, satisfactory academic and/or professional qualifications.
Executive Director- 5 years of relevant working experience, satisfactory academic and/or professional qualifications.
The applicant should have at least 3 years of proven track record in respect of each type of insurance broking business that it intends on carrying out in Singapore. (Where this requirement is not satisfied, track record of the applicant’s substantial shareholders and experience and qualifications of the applicant’s key management staff may be considered by MAS.)
- There must be adequate internal compliance systems and processes commensurate with the size and complexity of its business to ensure compliance with the law, good practices and professional standards.
- The applicant should have adequate internal control systems and processes to address and manage conflict of interest situations
For example, where an application is for both a direct insurance broker and general reinsurance broker, there is proper segregation of operations like separate servicing/broking divisions with separate management and broking staff to handle the two types of business, or disallowing broking staff to handle both the direct insurance and reinsurance placements that give rise to the same risks
- The applicant, all of its directors, officers, broking staff, employees and substantial shareholders must satisfy the Guidelines on Fit and Proper Criteria
Every registered and exempt insurance broker shall establish and maintain a register of its broking staff which includes:
- the names of broking staff
- the type or types of insurance broking activity
- the date on which each type of insurance broking activity commenced
- any qualification obtained or requirement fulfilled by the insurance broker
The Authority will issue an annual fee letter to the applicant on the amount of annual fees payable. The initial payment of the annual fee would be due within 2 weeks from the date of the issuance of the annual fee letter.
The Annual Fees based on the broker type:
- Direct Insurance Broker – $7,000
- General Reinsurance Broker – $5,000
- Life Reinsurance Broker – $2,500
When there is a combination any of the business the fees will be aggregate of the relevant amounts.
Reporting Requirements for Misconduct by Insurance Brokers.
- Any registered or exempt insurance broker shall report to the MAS, upon discovery of any misconduct as laid down in Notice to Insurance Brokers (MAS 504) committed by their staff by submitting a misconduct report not later than 14 days after the discovery of the misconduct by the registered or exempt broker, as the case may be.
- An update report shall be submitted to MAS, where an insurance broker or an exempt insurance broker has not concluded its investigation or has not taken any disciplinary action against the broking staff concerned. This is in order to provide an update of the case to the MAS as and when there is any significant development.
- If there is no misconduct, the insurance broker or exempt insurance broker shall submit to MAS a nil declaration not later than 14 days after 31 December of that calendar year in the form prescribed by MAS in the Notice to Insurance Brokers (MAS 504).
Persons Exempt from Registration
Under 35ZN of the Insurance Act, certain persons are exempt from the registration requirements for insurance Brokers with MAS,
- a bank licensed under the Banking Act
- a merchant bank approved as a financial institution and approved to carry on business as an insurance broker under the Monetary Authority of Singapore Act
- a licensed financial adviser under the Financial Advisers Act
- a holder of a capital markets services license under the Securities and Futures Act
- a finance company which has been granted an exemption from section 25(2) of the Finance Companies Act to carry on business as an insurance broker
- a direct insurer registered to carry on life business (see definition below); and
- such other persons or class of persons as may be prescribed
Life Business means insurance business concerned with life policies, long-term accident and health policies, or both
Lodgment of Returns with MAS for Registered Insurance Brokers
As per the Insurance (Intermediaries) Regulations, a registered insurance broker shall, within 5 months from the end of each financial year, lodge the following Forms with the MAS:
- a balance-sheet as at the end of that financial year in Form A
- insurance broking premium accounts in Form B
- a profit and loss account in Form C
- particulars as to the type and placement of all of its business handled during that financial year in Form D
- a report prepared and signed by an auditor in Form K
Lodgment of Documents by Exempt Insurance Brokers
- notice of commencement of business in Form E (within 14 days of commencement of business)
- notice of change of particulars in Form F (within 14 days of commencement of business)
- notice of intention to cease business Form G (at least 14 days before the proposed date of cessation )
- an audited statement of the insurance broking premium account in Form H (within 5 months from the end of each financial year)
- particulars as to the type and placement of all of its business handled during that financial year in Form 1
How can Argus help?
Argus specializes in regulatory compliance and provides objective insights, subject expertise and a simple approach to all your compliance-related needs. Our diversified client base spans start-ups to mature businesses. If you are keen on stepping into the Singapore market as an insurance broker, we will be happy to assist you with your registration with MAS and all other compliance needs that may arise. We will be happy to answer your queries, whether specifically to this article or any other regulatory compliance hurdles you may face. Do reach out to us at [email protected]