Singapore to liberalise insurance

Business Asia, August 2, 1999

Singapore's insurance industry looks set to be opened up to greater foreign competition, with the city-state's central bank undertaking a review to liberalise the sector.

The review comes on the back of sweeping changes made to Singapore's banking system introduced in May.

The changes included lifting of a 40 per cent cap on foreign ownership and allowing foreign banks to open more branches and cash machines.

While few details of the plan have been announced, Monetary Authority of Singapore (MAS) deputy director for financial supervision Tharman Shanmugaratnam said the government was "looking at issues of opening up the industry gradually more to competition".

"We need to enhance the depth and competitiveness of our banking and insurance industries," he said.

"The domestic banking liberalisation package is a major step in this direction. We are currently doing a similar review of the insurance industry."

The regulatory changes could mean stiffer competition for insurance companies such as Great Eastern Life Assurance - the country's largest publicly traded insurer-which saw its sales fall as a result of a slowdown in the island's economy.

During the past year, the government has reduced the capital requirement for some insurers, cut restrictions on the writing on some forms of insurance and increased regulation of insurance-linked mutual funds.

The changes have come at a particularly tough time for Singapore's insurance industry, with total premiums collected by insurance companies this year falling 8.8 per cent to S$7.8 billion (US$4.6 billion).

"The decline in domestic business was attributable to the prevailing difficult economic conditions and intense competition," the MAS said in reference to the insurance sector.