Singapore is known for its well-regulated insurance market that offers businesses a variety of coverage options. Due to that, Singapore based companies are used to the stability Singapore insurers provide for selected risks. Yet, it is not widely known that there are other available options outside of the Singapore market. We dive into the insurer landscape available in Singapore and offshore, look into ratings and how that may affect your decision on choice of insurer, as well as examine the importance Monetary Authority of Singapore (MAS) regulation places on the decision making process.
Local vs Offshore
There are currently 51 direct general insurers registered in Singapore with MAS. That is how many insurance companies there are in Singapore who can underwrite and issue policies to Singapore companies for non-life insurance policies.
These 51 insurance companies are licensed and regulated by MAS to operate in Singapore. These insurers provide policies that comply with Singapore’s strict regulatory framework, ensuring financial security and consumer protection. Some benefits of choosing local insurers include:
- Regulatory oversight: MAS ensures these insurers meet solvency requirements, maintain risk management standards, and protect policyholders.
- Easy claims process: Local insurers are more accessible for claim negotiations, dispute resolution, and legal recourse.
- Familiarity with Singapore market: Local insurers tailor policies to meet the specific needs of businesses operating in Singapore.
However, did you know that offshore insurance companies are also an option for certain circumstances?
Offshore insurers operate outside Singapore’s jurisdiction and are not regulated by MAS. Companies may choose offshore insurers for reasons such as lower premiums or specialised coverage. For example, if your company is involved in new technologies such as drones, Intellectual Property, AI or new types of digital assets, it may be difficult to find Singapore based insurers who have the risk appetite to underwrite the policies. Or if they are able to underwrite the policies, the coverages may be limited and the pricing can be extremely high. Offshore insurers may be able to provide coverage at a much more competitive and affordable price.
Whilst that might sound more attractive, there are some risks involved when engaging with offshore insurers. The key risks being:
- Lack of MAS oversight: Offshore insurers do not have to meet MAS’s regulatory requirements, which could pose solvency risks.
- Legal and compliance issues: Some offshore policies may not align with Singapore’s business regulations and might breach Singapore regulations.
- Complex claims process: Claims might have to be settled in a foreign jurisdiction, making dispute resolution more challenging.
Rated vs. Unrated Insurers
If you are exploring the option of using offshore insurers, you need to be aware of the differences between rated and unrated insurers.
Insurance providers are often classified as rated or unrated based on assessments from global credit rating agencies like A.M. Best, Standard & Poor’s, and Moody’s.
Rated Insurers
Rated insurers have undergone financial stability evaluations and received a rating indicating their ability to meet claims obligations. Benefits of choosing rated insurers include:
- Financial security: Highly rated insurers are more likely to pay claims reliably.
- Risk mitigation: Businesses can trust that their insurer is financially sound and less likely to face insolvency.
- Credibility: Global rating agencies ensure transparency in an insurer’s financial health.
Unrated Insurers
Unrated insurers have not been, or are too small or too risky to be assessed by major rating agencies, which may raise concerns about their financial strength. While they may offer lower premiums, the risks include:
- Uncertainty: Without a rating, there is no independent verification of financial stability.
- Higher risk of non-payment: Businesses may face difficulties or delays in claim payouts if the insurer encounters financial trouble.
- Limited trust: Some clients, vendors, or regulators may require businesses to be insured by a rated insurer.
Why MAS Regulation is Critical for Businesses
MAS serves as the regulatory body overseeing the insurance industry. MAS plays a crucial role in ensuring that insurers maintain financial health and adhere to consumer protection guidelines. That means that if you choose an insurer that is regulated in Singapore, you get the peace of mind knowing that you are protected under Singapore’s legal framework.
How we Can Help
Navigating the complexities of the Singapore insurance market requires expert guidance. As a MAS regulated insurance broker, Anapi cannot place offshore coverage for local risks without MAS approval, which is only given if there is clear proof that local markets cannot insure your risks (not just because offshore insurers are cheaper).
We can give general advice on coverage, claims and issues with using offshore insurers for local risks, including if there are possibly regulatory issues when it comes to the legality of such coverage, tax or claims.
Additionally, we have access to the entire Singapore insurance market, thereby able to review and compare insurers for quotes for you. We can also offer advice on how to structure policies, help you get suitable coverage and ensure compliance with Singapore’s regulations.
