Industry Fundamental
(Editor's Note: This section of the report is adapted from the Standard & Poor's Singapore Insurance Digest released in March 2000)

Life
Market composition. The market is made up of 14 providers, of which six also offer general insurance products. While the number of life insurers is not excessive, the market is highly concentrated, with the degree of concentration increasing in 1998. The top-two companies controlled 61% of total premium income in 1998. The top-four captured 88% of total premium income, and the remaining 12% of total premiums were spread among the 12-smallest companies.

Distribution
Distribution of life products is achieved for the most part through tied agency forces, although particular companies have successfully diversified distribution channels to include direct sales and sales through associated banks. The Singapore market has been disciplined in avoiding the disruptive agent-raiding practices that have been seen in Hong Kong. Such discipline is beneficial to both the policyholder in terms of quality of service, and to the life insurers in terms of securing policyholder loyalty and controlling distribution costs. It also allows insurers to experiment with new distribution channels and insurance products without fear of disruption to the agency force.

Products
The Singapore life market is arguably the most developed of all Asian life markets, offering a wide variety of fairly sophisticated products.

The range of products sold includes whole life, endowment, temporary (term), accident and health, and annuities. In the past five years, most life insurers have started selling investment-linked business; Prudential Assurance Co. Singapore (Pte.) Ltd. and NTUC Income Insurance Cooperative Ltd., were among the first to offer these products.

Regulation
Regulation of life companies in Singapore is administered by MAS, through the Insurance Act 1966. Standard & Poor's considers the current regulatory environment satisfactory in terms of policyholder protection, although continued progress in enhancing the timeliness and transparency of information would be beneficial to policyholders.

The MAS assesses solvency by requiring a solvency margin of the greater of S$5 million plus the sum of certain percentages of policy reserves, net premiums, and net amounts at risk (depending on the class of business). Asset Allocation. One of the most important lessons learned by Singapore insurers in 1997-1998 was the need to carefully consider asset allocation. Many insurers were ill prepared for the regional share market volatility, with their investment portfolio too heavily weighted in equities. In the two years to December 1998, there was a significant reduction to 24.7% from 31% in the proportion of investment assets represented by equities.

The MAS sets controls, in the form of investment limits, for all assets of Singapore general insurance and non-linked life insurance funds of registered insurers and reinsurers to ensure a certain degree of diversification by type of assets and exposure to any single party. Amounts in excess of the prescribed investment limits would not be admissible for the purpose of meeting the solvency margin of the Singapore general and life insurance funds.


General
The Singapore general insurance market is a small, developed, but over-serviced market. The insurance industry is more substantial than a population of under four million would normally infer, underpinned by the role of Singapore as a major regional service and shipping hub.

Distribution
Distribution is largely achieved through commission-based agency networks and brokers. A general insurance agent in Singapore may sell products from up to three companies. The poaching of agents from one company to another is strongly discouraged by the MAS, and the industry has been disciplined in this regard. Still, the strong relationship between client and intermediary in selling general insurance imparts importance to the agency network as an asset of an insurer.

In 1998, total general insurance business (domestic and offshore) decreased by 8.4% to Singapore dollar (S$) 2.7 billion (S$2.9 billion in 1997). Domestic business contracted by 7.1%, while offshore business reported a sharper decline of 10% (see table 2).

Domestic business was adversely affected by the slowdown in economic activities, as well as intense premium rate competition. All classes of business recorded negative growth, including motor business, which contracted as a result of the depressed car market and rampant rate cutting.

Miscellaneous business was the most robust class, declining only 3.3%, as increased levels of accident and healthcare insurance helped to partly offset a drop-off in construction-related lines.

Offshore business volumes felt the effects of the regional economic crisis more than the domestic business, with a 10% decline in gross premiums. In addition, soft reinsurance market conditions reduced reinsurance premiums, which make up most of the offshore business.

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