No need for Income policyholders to be concerned as insurer has enough capital, amid blocked Allianz deal: Chee Hong Tat
The government had intervened to stop the proposed deal between Income Insurance and German insurer Allianz.
Transport minister and second minister for finance Chee Hong Tat in parliament on Oct 14, 2024.
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SINGAPORE: Income Insurance has enough capital to meet its liabilities and existing policyholders need not be concerned, despite a proposed deal with German insurer Allianz being blocked, Monetary Authority of Singapore (MAS) deputy chairman Chee Hong Tat said in parliament on Monday (Oct 14).
Mr Chee, who is also transport minister and second minister for finance, reassured Income policyholders, after Culture, Community and Youth Minister Edwin Tong announced that the government had intervened to block the deal.
“The existing policyholders of Income need not be concerned as MAS will continue to regulate Income as a licensee,” said Mr Chee, in response to a question from MP Desmond Choo (PAP-Tampines) on what the intervention means for policyholders moving forward.
“Income has sufficient resources to meet the necessary capital adequacy ratio, which means it has enough capital to meet its liabilities and also to pay out to policyholders.”
Under the proposed transaction announced on Jul 17, Allianz would have acquired a majority stake in Income. The announcement raised public concerns over whether Income would continue its social mission.
Mr Chee emphasised that MAS had not yet approved the proposal. He added that the best way to protect policyholders, apart from ensuring the insurers have sufficient capital, is to ensure that Singapore has “a competitive insurance industry”.
“That will give choice and options to policyholders to be able to choose what is the best product (and) the most competitive product that can meet their needs,” said Mr Chee.
In Parliament on Monday (Oct 14), Culture, Community and Youth Minister Edwin Tong and Second Minister for Finance Chee Hong Tat, speaking on behalf of the Monetary Authority of Singapore (MAS), responded to clarifications sought by Members of the House after Mr Tong’s ministerial statement on the Government intervening to block a proposed deal between NTUC Income and German insurer Allianz.
OPEN AND TRANSPARENT HANDLING OF MATTER
On Monday, MPs on both sides of the House raised questions in response to the announcement.
In response to a question from MP Jamus Lim (WP-Sengkang) on any implications this saga may have for MAS’ global reputation, Mr Chee said the central bank always seeks to ensure it regulates in an "even-handed" and open manner.
“MAS takes its international reputation very seriously, and this is the reason why we want to handle this matter in an open and transparent manner, coming to parliament to pass the amendments to the Insurance Act, and to do so with urgency,” he said.
A Bill to amend the Insurance Act will be tabled “on an urgent basis”, and read a second and third time on Wednesday, Mr Tong announced earlier on Monday.
“I would like to reiterate that the reason why we have concerns about this particular deal is not because there is a foreign entity, Allianz, in this case, and it's also not because we have concerns about Allianz being fit and proper and being a suitable partner for Income,” said Mr Chee.
ISSUES WITH DEAL
NCMP Leong Mun Wai (PSP) accused the government of not disclosing information about the proposed deal to the public.
In response, Mr Tong said: “You can't expect that every time information about a potential application or an acquisition, or a deal is proposed to be made and information given to MAS, that it is shared with all in sundry. That's not how MAS works.”
MAS realised in this case that there were various issues that the Ministry of Culture, Community and Youth (MCCY) may be concerned about, and it shared the relevant information, he said.
All parties then collectively looked at it and came to a view as a government on a decision that would serve the public interest, said Mr Tong.
The Singapore Government has intervened to stop the proposed deal between NTUC Income and German insurer Allianz, under which Allianz would have acquired a majority stake in Income. The announcement of the deal had earlier sparked a public outcry amid concerns about whether Income would maintain its social mission. In Parliament on Monday (Oct 14), Culture, Community and Youth Minister Edwin Tong said the Government had assessed the proposed transaction and decided “it would not be in the public interest” for the deal - in its current form - to proceed. However, the Government is open to new arrangements if its concerns are fully addressed. In his ministerial statement, Mr Tong explained that after receiving more information on the deal from the Monetary Authority of Singapore (MAS), his ministry (MCCY) could not reconcile a proposed substantial capital reduction, soon after the transaction is completed, with Income’s representations during its corporatisation exercise that it was aiming to build up capital resources and enhance its financial strength. Income had sought - and been granted - exemption from Section 88 of the Co-operative Societies Act, allowing it to carry over about S$2 billion in surplus to the new corporate entity. The proposed capital reduction in the Income-Allianz deal “runs counter” to the premise for why the exemption was given, Mr Tong said. He also noted that there are no clear binding provisions or structural protections in the deal to ensure that Income’s social mission will be discharged. While MCCY accepts that NTUC Enterprise (NE) has committed “in good faith” to maintaining Income’s social mission, it is not confident NE’s intentions or assurances can be upheld, Mr Tong said. The minister emphasised that the Government supports Income’s efforts to find a strong partner to strengthen its capital base and market position and that Allianz is a partner that could offer financial strength and expertise. The Government is open to any new arrangement Income might wish to pursue - with Allianz or others - “so long as the concerns highlighted are fully addressed”. Mr Tong also said the Government is moving to urgently amend the Insurance Act, to provide a clear statutory basis for MCCY’s views to be considered in any approval by MAS involving an application relating to an insurer that is either a co-op or linked to a co-op.
“I think Mr Leong shouldn't mischaracterise what happened,” he said.
“We had to reach a view as to, not just that it is not in the public interest to proceed, but what we will do about it,” he added.
“This is after all a live transaction that’s going on, and there is market-sensitive information as well.”
Citing Mr Leong’s experience in the financial sector, Mr Tong said the Non-constituency MP should know that it is a typical arrangement for parties to submit proposals or plans to MAS, without them being made public until the deal is finalised.
“Income has obligations with shareholders as well, and this is a step that happens after the transaction is completed. They haven't even applied to approve the transaction,” he said.
“Be circumspect about making allegations that parties, whether government or Income, could be much more open or are withholding information, because there is a due process to how this is done, and you don't go out there and produce information about a proposal when the transaction has not even been approved.”
