International Comparative Legal Guide – Insurance & Reinsurance 2022
Practical cross-border insights into insurance and reinsurance law
This article was first published in ICLG - Insurance & Reinsurance.
1.1 Which government bodies/agencies regulate insurance (and reinsurance) companies?
Insurance and reinsurance activities are regulated by the Monetary Authority of Singapore (“MAS”), established by the Monetary Authority of Singapore Act (Cap 186). The MAS is responsible for the licensing, authorisation and supervision of insurance and reinsurance activities. The MAS can regulate and enforce the Insurance Act (Cap 142) and its regulations.
The Insurance Act (Cap 142) governs and regulates insurance and reinsurance activities. Insurance intermediaries and related institutions in Singapore are also regulated under the Insurance Act.
1.2 What are the requirements/procedures for setting up a new insurance (or reinsurance) company?
An entity that wishes to carry on an insurance business as an insurer or reinsurer must apply in writing to the MAS setting out the specific types and classes of insurance or reinsurance to be sold. The MAS will not grant a licence unless the applicant takes one of the following forms:
- A company incorporated in Singapore.
- A company incorporated outside Singapore with an established place of business in Singapore.
- A co-operative society.
The entity must also satisfy financial requirements, such as maintaining adequate capital commitments and eligible forms of collateral that the MAS may prescribe as it thinks fit. Insurers underwriting different classes of risks must also pay the relevant annual fees to the MAS.
The MAS takes into account the following factors when considering such applications: the rankings of the applicant insurer or reinsurer (domestically in respect of classes of insurance already sold, or internationally); their credit ratings and track records of financial management; corporate governance; and risk management.
1.3 Are foreign insurers able to write business directly or must they write reinsurance of a domestic insurer?
Foreign insurers carrying on insurance business under a foreign insurer scheme can only carry on business in particular classes of insurance as determined by the MAS and must be duly licensed in their home country. Currently, there are two foreign insurer schemes in Singapore: the Lloyd’s Asia Scheme; and the Lloyd’s Scheme.
Approved Marine, Aviation and Transit (“MAT”) insurers can operate in Singapore if they are approved under the Insurance (Approved Marine, Aviation and Transit Insurers) Regulations 2003. MAT insurers do not have a physical presence in Singapore and do not carry on insurance business other than the collection or receipt of premiums in relation to MAT.
1.4 Are there any legal rules that restrict the parties’ freedom of contract by implying extraneous terms into (all or some) contracts of insurance?
Generally, the form and content of insurance policies are not heavily regulated. Such policies will be binding provided that the basic requirements of an insurance policy are met. However, the following policies are subject to specific form and content requirements:
- Life policies under the Insurance Act and applicable subsidiary legislation, such as the Insurance (General Provisions) Regulations.
- Marine insurance policies under the Marine Insurance Act.
- Work injury policies under the Work Injury Compensation Act.
- Motor vehicle insurance policies under the Motor Vehicles (Third Party Risks and Compensation) Act.
Common law implies a duty of utmost good faith (uberrimae fides) into all insurance and reinsurance contracts. For marine insurance contracts, such duty is implied by the Marine Insurance Act. The duty requires both parties to act in good faith and with regard to the interests of the other party. It is particularly relevant where the policy requires the insured to provide information and assistance to the insurer in particular circumstances, and where an insurer exercises its right of subrogation and conducts the insured’s defence against a third party.
The insured also has an affirmative duty to disclose all material facts and refrain from making untrue statements when negotiating the insurance contract. The insurer may otherwise be entitled to void the policy on the ground that it has been induced into entering the contract by the insured’s failure to disclose material facts. In such a case, the insurer must also return any premiums paid to the assured as soon as practicable.
1.5 Are companies permitted to indemnify directors and officers under local company law?
The general provision is that under section 172(2) of the Companies Act (Cap. 50), any provision (whether in the articles of association or in a contract or otherwise) indemnifying an officer of the company against any liability for negligence, default, breach of duty or breach of trust is void, except as permitted by sections 172A and 172B.
Section 172A provides that a company may purchase and maintain for an officer of the company insurance against any liability referred to in section 172(2).
Section 172B provides that a company is allowed to indemnify its officers against liability incurred by the officers to third parties, subject to certain qualifications. The indemnity shall not apply where it is against (a) any liability of the officer to pay a fine in criminal proceedings or a penalty to a regulatory authority for non-compliance with any regulatory requirement, or (b) any liability incurred by the officer in defending criminal proceedings where he is convicted or in defending civil proceedings brought by the company or a related company where judgment is given against him or where an application for relief is rejected by the Court.
1.6 Are there any forms of compulsory insurance?
There are a number of types of compulsory insurance in Singapore, dependent upon the industry or sector. Some of the most common types are:
- professional indemnity insurance (e.g. for lawyers, doctors, real estate agents or insurance brokers);
- work injury compensation insurance;
- motor vehicle insurance;
- property insurance; and
- marine/shipping insurance.
2. (Re)insurance Claims
2.1 In general terms, is the substantive law relating to insurance more favourable to insurers or insureds?
An insurance contract is governed by the terms therein. The Court will construe the terms according to the general contractual rules of interpretation, subject to where the terms have their specific technical legal meaning. In general, the Court will hold parties to the terms of the bargain as expressed in the policy, and would generally not imply terms to make a policy more favourable to either the insurer or the insured.
That being said, given that insurance policies are in many cases issued on the insurer’s standard terms, where the insurer intends to rely on its own standard terms (or on industry-standard terms) in the policy in its favour (such as exclusions, warranties or conditions precedent), the Court requires those terms to be clear and unambiguous.
2.2 Can a third party bring a direct action against an insurer?
A third party can bring a direct action against an insurer where:
(i) the insurance policy is in respect of third-party risks;
(ii) liability was incurred by the insured against the third party; and
(iii) the insured has become bankrupt or, in the case of a company, wound up.
This is provided in the Third Parties (Rights Against Insurers) Act and also in the Motor Vehicles (Third Party Risks and Compensation) Act in respect of motor insurance policy for third-party risks.
2.3 Can an insured bring a direct action against a reinsurer?
Whilst at common law, persons who are not party to a contract of (re)insurance cannot bring an action under the (re)insurance contract (the privity rule), it is arguable that the Contracts (Rights of Third Parties) Act might allow an insured to bring a direct action against a reinsurer (even though the contract of reinsurance is between the reinsured and the reinsurer, and not between the insured and reinsurer) where:
(i) the reinsurance contract expressly provides that the insured may bring a direct action against a reinsurer; or
(ii) the reinsurance contract purports to confer a benefit upon the insured, such as the loss payee clause.
Both insurance and reinsurance policies, routinely, tend to contain third-party rights exclusion clauses. Nevertheless, a clearly worded (and workable) cut-through clause would be likely to be recognised and enforced.
2.4 What remedies does an insurer have in cases of either misrepresentation or non-disclosure by the insured?
An insurer is entitled to void/rescind the contract if a representation made by the insured during the negotiations for the contract was in fact untrue and the representation was material in that it: (i) would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk; and (ii) did in fact induce the actual underwriter.
Similarly, an insured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured. The insurer may void the contract if the insured fails to make such disclosure.
2.5 Is there a positive duty on an insured to disclose to insurers all matters material to a risk, irrespective of whether the insurer has specifically asked about them?
The insured has a positive duty to disclose to the insurers all matters material to a risk. Whilst the insurer may ask (or be put on notice to ask) specific questions to the insured either in the proposal form or during placement, this does not relieve the insured of his positive duty to disclose all material matters.
It is, however, possible that the questions asked by an insurer (or the agreed terms of the insurance cover) might limit the duty of disclosure, in that, if questions were asked by the insurer on particular subjects (or certain terms of cover offered), it may be inferred that the insurer has waived his right to information on the said subjects even though they are outside the scope of those questions, or has waived materiality on those matters.
2.6 Is there an automatic right of subrogation upon payment of an indemnity by the insurer or does an insurer need a separate clause entitling subrogation?
It is well established that an insurer, upon payment of indemnity to an insured, would acquire the rights of subrogation so long as the right of subrogation is not excluded by the terms of the insurance contract. Whilst it is common to have a clause providing subrogation in an insurance contract, there are legal authorities which state that the insurer’s rights of subrogation rest upon terms implied in the contract of insurance by operation of the law. As such, it may not be necessary for a separate clause to provide that the insurers are entitled to subrogation. Nevertheless, given that many subrogation actions involve steps being taken in jurisdictions which do not recognise an automatic subrogation right, it would be advisable to maintain an express subrogation clause (including rights to an assignment, etc.) in the policy.
3. Litigation – Overview
3.1 Which courts are appropriate for commercial insurance disputes? Does this depend on the value of the dispute? Is there any right to a hearing before a jury?
Civil cases such as commercial insurance disputes are heard before the High Court and the State Courts of Singapore (which comprise the District Court and Magistrates’ Court).
Ultimately, the value of the claim will determine which Court the action is appropriately commenced in. In general, civil cases involving claims not exceeding S$60,000 are dealt with by the Magistrates’ Court. Claims of more than S$60,000 but not exceeding S$250,000 are dealt with by the District Court. Finally, claims which exceed S$250,000 are dealt with by the General Division of the High Court.
There is no right to a hearing before a jury, as jury trials were abolished in 1969. Instead, a Judge decides on issues of both fact and law.
3.2 What, if any, court fees are payable in order to commence a commercial insurance dispute?
Court fees are prescribed under Appendix B of the Rules of Court and are payable at the various stages in the civil proceedings. Depending on the claim value, fees payable to Court for the filing of any originating process and pleadings containing a claim or cause of action would range from S$100 (for an action commenced in the Magistrates’ Court) to S$1,000 (for an action commenced in the High Court with a value of more than S$1 million).
3.3 How long does a commercial case commonly take to bring to court once it has been initiated?
Typically, civil proceedings will on average last between 12 and 24 months from the commencement of the action in Court to the final disposal of the action by the Court. Factors which may affect the timeline include whether or not there are interlocutory applications, the discovery process and the value of the claim. In particular, claims commenced in the Magistrates’ Court are subject to a simplified civil process, which includes upfront disclosure of documents and early and robust case management by the Court.
The average waiting times between the filing of certain processes or other steps in the proceedings and the date for the hearing or pre-trial conference of the matter are set out in Appendix B of the Supreme Court Practice Directions and paragraph 64 of the State Courts Practice Directions. Generally, for suits commenced in the General Division of the High Court, it takes approximately 18 months from the service of a writ to the commencement of trial, assuming that there are no complex interlocutory applications. The Courts strive to be efficient in their management of the cases.
3.4 Does COVID-19 have, or continue to have, a significant effect on the operation of the courts, or litigation in general?
Before the outbreak of COVID-19, the Singapore Courts had an existing practice in place that enabled remote appearance of witnesses in Court. As a result of COVID-19, the Courts have implemented various measures to allow more matters (such as pre-trial conferences, and even hearings) to be heard via video conference.
COVID-19 continues to have a significant effect on the operation of the Courts, and litigation in general, in that the Courts have continued with the measures allowing for matters to be heard via video conference.
4. Litigation – Procedure
4.1 What powers do the courts have to order the disclosure/discovery and inspection of documents in respect of (a) parties to the action, and (b) non-parties to the action?
In respect of (a) parties to the action, parties have an ongoing duty to disclose all relevant and necessary (for either disposing fairly of the cause or saving costs) documents (whether favourable or unfavourable to a particular party) in their possession, custody or power, save for those protected by privilege. Parties are required to exchange lists of documents and conduct inspections of the documents (if necessary).
In the event that one party believes that the other party has given inadequate discovery, it may apply to Court for, and the Court may grant an order for, specific discovery of the documents, provided that the documents are directly relevant (i.e. there is a reasonable nexus between the documents sought and the parties’ pleaded cases) or indirectly relevant (i.e. they are documents which may lead the requesting party to a train of inquiry).
In respect of (b) non-parties to the action, an application may be made for, and the Court has the power to grant, an order for the discovery of documents by a person who is not a party to the proceedings before the commencement of proceedings, or for the discovery of documents relevant to an issue arising or likely to arise out of the claim made or likely to be made in the proceedings, or to identify the possible parties to the proceedings. The person against whom an order is sought under this rule is entitled to his costs of the application and of complying with any order made thereon on an indemnity basis, unless the Court otherwise orders.
4.2 Can a party withhold from disclosure documents (a) relating to advice given by lawyers, or (b) prepared in contemplation of litigation, or (c) produced in the course of settlement negotiations/attempts?
In short, yes.
In relation to (a), documents relating to advice given by lawyers are protected by legal advice privilege and do not have to be disclosed.
In relation to (b), communications with third parties created for the dominant purpose of legal proceedings which are reasonably anticipated or existing are protected by litigation privilege, and do not have to be disclosed.
In relation to (c), correspondence exchanged in the course of settlement negotiations or attempts with a genuine attempt to settle the dispute amicably are protected by “without prejudice” privilege, and do not have to be disclosed.
4.3 Do the courts have powers to require witnesses to give evidence either before or at the final hearing?
Yes, this is done by the issuance of subpoenas by the Court. Three types of subpoenas may be issued. The first requires the witness to attend Court to give oral evidence, the second requires the person named to produce documents without the obligation to attend personally, and the third is a combined subpoena that requires the witness to give evidence in Court and produce documents.
Unless set aside by the Court, the person against whom the subpoena is issued must attend Court on the stipulated day and every other day of the hearing until the case is completed. Failure to do so may render one guilty of contempt of Court, with consequences of a fine or imprisonment.
4.4 Is evidence from witnesses allowed even if they are not present?
It depends. Witnesses will typically give their evidence by Affidavit of Evidence-In-Chief (“AEIC”) made under oath; the AEIC will be filed and exchanged prior to trial. Unless the Court otherwise orders or the parties agree to waive the attendance of the witness, the witness must attend trial for cross-examination regarding his AEIC. If the witness fails to attend trial, the AEIC will not be received in evidence except with the leave of the Court.
In the event that the witness is unable to attend trial physically in Singapore, parties may seek leave from Court for their witnesses to provide evidence remotely. The grounds for doing so include where there is express agreement between the parties that evidence may be so given and where the witness is residing overseas. In considering whether to grant leave, the Court will examine the reasons for the witness being unable to attend physically in Singapore, and consider whether any party would be unfairly prejudiced.
4.5 Are there any restrictions on calling expert witnesses? Is it common to have a court-appointed expert in addition or in place of party-appointed experts?
Yes, the Court has wide discretion to either, by order, limit the number of expert witnesses or disallow expert evidence. The Court is likely to exercise its discretion to disallow expert evidence in cases where the evidence is capable of being understood by an ordinary person without any specialised knowledge. The admissibility or probative value of the expert’s evidence may be affected in instances where the expert displays partiality, presents evidence selectively or fails to detail literature on which the expert had relied in coming to his conclusion.
It is not common for there to be Court-appointed experts, although the Court has such a power. It is more common for experts to be appointed by the parties themselves.
4.6 What sort of interim remedies are available from the courts?
Parties can apply for the Court to grant a variety of interim or interlocutory injunctions. Broadly, injunctions include prohibitory injunctions (which are Court orders restraining a party from doing or continuing to do a wrongful act) and mandatory injunctions (which are Court orders compelling a party to perform a positive act). Some examples of injunctions granted by the Court include: search and seizure orders, which require a party to permit another to enter his premises for the purposes of searching for and seizing vital evidence to be preserved until trial; and freezing orders (both domestic or worldwide), which freeze the assets of the Defendant (where there is a real risk of dissipation of such assets) to prevent him from dissipating them, which would render the judgment entered against him nugatory.
4.7 Is there any right of appeal from the decisions of the courts of first instance? If so, on what general grounds? How many stages of appeal are there?
There is generally a right of appeal, save for those decisions specified in the Supreme Court of Judicature Act (“SCJA”) as non-appealable or appealable only with the leave of the Court. For matters which are appealable, they are generally on the grounds that there were errors in law or fact made by the Court below. Whilst the appellate Court may freely depart from the lower Court on points of law, its right to interfere with the lower Court’s findings of fact and exercise of discretion is more limited. Typically, the appellate Court will only overturn findings of fact based on the veracity or credibility of the witness if the lower Court’s assessment was plainly wrong or against the weight of the evidence.
There are various tiers of appeal. Any party who is not satisfied with the decision or order made by a District Judge or Magistrate in a civil action in the State Courts, including the Small Claims Tribunal, may file an appeal to the General Division of the High Court. Civil appeals arising from decisions of the General Division of the High Court are allocated between the Court of Appeal and the Appellate Division in accordance with the SCJA.
4.8 Is interest generally recoverable in respect of claims? If so, what is the current rate?
Yes, late payment interest at a default interest rate of 5.33% per annum is payable and accrues from the date of the costs order or judgment under which payment is due, until it is satisfied.
4.9 What are the standard rules regarding costs? Are there any potential costs advantages in making an offer to settle prior to trial?
The award of costs (including the quantum) is at the Court’s discretion. The general rule is that costs follow the event (that is, the successful party recovers its legal costs from the unsuccessful party). The Court will have regard to whether the costs were reasonably incurred and reasonable in quantum.
When awarding party-and-party costs, the Court will take into consideration any pre-trial offers to settle. If the Plaintiff makes an offer to settle and subsequently obtains a result which is equal to or better than the amount stated in the offer to settle, the Plaintiff may be awarded party-and-party costs on an indemnity basis from the date of its offer to settle. Conversely, if the Defendant makes an offer to settle and the Plaintiff subsequently obtains a result which is equivalent to or worse than the amount stated in the offer to settle, the Defendant may be awarded party-and-party costs on an indemnity basis from the date of the offer to settle.
4.10 Can the courts compel the parties to mediate disputes, or engage with other forms of Alternative Dispute Resolution? If so, do they exercise such powers?
The short answer is no. Alternative Dispute Resolution such as mediation, arbitration and neutral evaluation are consensual processes and will only be conducted if the parties agree. The Courts encourage, but do not compel, the use of Alternative Dispute Resolution.
4.11 If a party refuses a request to mediate (or engage with other forms of Alternative Dispute Resolution), what consequences may follow?
At the end of the proceedings, the Court may, when making an order on costs, take into account the parties’ conduct in relation to any attempt at resolving the matter by mediation or other forms of Alternative Dispute Resolution. Adverse cost orders may be made against a party for its unreasonable refusal to engage in mediation or other forms of Alternative Dispute Resolution.
5.1 What approach do the courts take in relation to arbitration and how far is the principle of party autonomy adopted by the courts? Are the courts able to intervene in the conduct of an arbitration? If so, on what grounds and does this happen in many cases?
The Singapore Courts adopt a pro-arbitration stance and seek to support rather than to frustrate the arbitration process. In particular, the Singapore Courts have expressly recognised that the principle of party autonomy should be respected by the Singapore Courts.
The Singapore Courts have supportive and limited supervisory functions over arbitrations held in Singapore. The level of curial supervision depends on which regime the parties have chosen – the Singapore Courts have a wider supervisory role in arbitrations under the Arbitration Act (“AA”) rather than those under the International Arbitration Act (“IAA”). The Singapore Courts’ intervention is limited to specific instances expressly provided by the IAA, whereas for arbitrations under the AA, there is a right of appeal against an award made under the AA to the Singapore Courts, albeit only on a question of law.
Some examples in which a Singapore Court may intervene in the conduct of the arbitration include: its refusal to grant a stay of judicial proceedings brought in breach of the arbitration agreement; its decision on a challenge as to the arbitrator; its hearing of an appeal on the question of arbitral jurisdiction; and its refusal to grant leave to enforce the award.
5.2 Is it necessary for a form of words to be put into a contract of (re)insurance to ensure that an arbitration clause will be enforceable? If so, what form of words is required?
Parties must agree to refer their disputes to arbitration before they can have recourse to arbitration. In order for the parties’ arbitration agreement to be enforced in accordance with the AA and the IAA, the content of the arbitration agreement must be recorded in writing, regardless of whether the arbitration agreement or contract has been concluded orally, by conduct or by other means.
There is no requirement for specific words or form to be used to constitute an enforceable arbitration agreement. However, the parties’ intention to arbitrate must be clear and unequivocal. The arbitration agreement should also clearly state the choice of legal seat and the law that governs the arbitration agreement (in addition to the law governing the contract).
The Singapore International Arbitration Centre (“SIAC”) suggests using the following wording for a standard arbitration agreement clause in a contract:
“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause. The seat of the arbitration shall be [Singapore]. The Tribunal shall consist of [1 or 3] arbitrator(s). The language of the arbitration shall be [English].”
5.3 Notwithstanding the inclusion of an express arbitration clause, is there any possibility that the courts will refuse to enforce such a clause?
The Singapore Courts may refuse to enforce an express arbitration clause when the wording is ambiguous such that it is impossible to infer the parties’ intention to arbitrate the dispute.
5.4 What interim forms of relief can be obtained in support of arbitration from the courts? Please give examples.
The Singapore Courts have the same power to make orders in respect of certain matters as they have for the purpose of and in relation to an action or matter in the Court. The specific type of matter would depend on the regime of the arbitration. For instance, for arbitrations under the IAA, the Singapore Courts do not have the power to make orders or give directions for the provision of security for costs or the discovery of documents and interrogatories.
However, regardless of whether the arbitration is under the AA or the IAA, the Singapore Courts can grant interim forms of relief such as making orders in respect of the preservation, interim custody or sale of any property which forms part of the subject-matter of the dispute, and the preservation and interim custody of any evidence for the purposes of the proceedings.
While the Singapore Courts have concurrent powers with the Arbitral Tribunal in making orders relating to interim measures, the Singapore Courts will avoid usurping the functions of the Arbitral Tribunal in exercising such jurisdiction and will only order interim relief where this will aid, promote and support arbitration proceedings.
5.5 Is the arbitral tribunal legally bound to give detailed reasons for its award? If not, can the parties agree (in the arbitration clause or subsequently) that a reasoned award is required?
Pursuant to the AA and the IAA, other than an award on agreed terms, an award must be given with reasons. Certain institutional rules such as the SIAC Rules 2016 may also require the award to be made with reasons. However, the AA, IAA and SIAC Rules 2016 allow parties to dispense with the requirement for reasons to be stated in the award by agreement.
While the absence of reasons in an award (unless the reasons are dispensed with by parties’ agreement) is not, in itself, a ground for it to be set aside, it may give rise to challenges from the party against whom it is sought to be enforced.
5.6 Is there any right of appeal to the courts from the decision of an arbitral tribunal? If so, in what circumstances does the right arise?
There is a right of appeal only for arbitrations under the AA. Pursuant to section 49 of the AA, an arbitration award made under the AA may be appealed against on a question of Singapore law arising out of the arbitration award. The question of law to be appealed upon involves the finding of a point of law by the arbitrator which the guidance of the Singapore Courts is required to resolve, and does not extend to an error in the application of the law.
An appeal may only be brought with the agreement of all the parties to the proceedings, or with the leave of the Singapore Courts. Parties may, however, agree to exclude the jurisdiction of the Singapore Court under section 49 of the AA.
While recourse by way of an appeal is available only to an award made under the AA, parties may apply to set aside an award made both under the AA or the IAA. The arbitral award can be set aside on specific grounds of procedural irregularities set out in the AA and the IAA. The setting-aside grounds include, but are not limited to, where the award is contrary to public policy or made in breach of natural justice.