Singapore to introduce new corporate structure for insurance, speed up approval of new fund types: DPM Gan

Singapore will introduce a new corporate structure for the insurance sector called the protected cell company (PCC), and speed up approvals for new categories of investment funds, in fresh measures to bolster the financial sector.

Deputy Prime Minister Gan Kim Yong, who is also minister for trade and industry, announced these initiatives at the annual dinner of the Association of Banks in Singapore (ABS) on Thursday (Jun 25).

He described them as part of the Republic’s push to build “trusted market infrastructure for Asia’s next phase of growth and development”.

DPM Gan, who also chairs the Monetary Authority of Singapore (MAS), said in his speech at the event that Singapore “needs to renew its usefulness and relevance in a fast-changing world”, and that one way to do so is to connect capital to growth and build resilience to risk.

As Asia “remains significantly underinsured”, financial centres that can bring together underwriting expertise, reinsurance capacity, alternative capital and flexible risk-transfer structures would be best positioned for growth, he noted.

Against this backdrop, MAS will soon launch a consultation on the proposed PCC framework.

A PCC would enable assets and liabilities to be ring-fenced within individual cells under a single core entity, making it possible to structure different risks separately under a shared infrastructure.

DPM Gan said that PCCs can make captive insurance solutions more accessible for corporates, and make it faster and cheaper for sponsors of insurance-linked securities to transfer risks to capital markets.

The proposed framework is conceptually similar to Singapore’s existing variable capital company (VCC) structure for investment funds. The VCC is a corporate structure designed to house investment funds for a wide range of assets.

Popular among some wealthy individuals and family offices, VCCs enable the creation of segregated funds so that managers can pull together assets for private investments or manage individual sub-funds on behalf of clients.

“By enabling more alternative risk-transfer solutions, the PCC framework will complement the traditional reinsurance market, expand risk capacity, and deepen Singapore’s role as an innovative hub for insurance and risk solutions,” said DPM Gan.

This supports MAS’ other initiatives in this space, such as those for growth capital and gold trading.

In February, MAS and the Ministry of Trade and Industry set up the Growth Capital Workgroup to strengthen Singapore’s growth capital ecosystem, in light of companies looking beyond bank lending for funding.

The Singapore Exchange has also announced a new gold clearing system, and MAS said it would provide vaulting facilities for foreign central banks and sovereigns.

MAS will unveil more details of the public consultation for the PCC in the coming weeks.

Speed up approvals for new fund types

MAS will also introduce a new category and process for non-traditional funds, so that fund managers can bring such funds to market more quickly, said DPM Gan.

It will take just three months to determine the necessary guard rails for the issuing of most new fund types.

Once the guard rails are established, funds of the same type can be authorised even more quickly – in three weeks – if they meet the requirements, DPM Gan said.

“Our objective is not innovation at all cost. It is trusted innovation at greater speed,” he added.

The funds must still meet core requirements, such as those for governance and asset safe keeping; underlying assets should also be based on publicly traded securities and financial derivatives.

The minister did not provide further details about the fund types covered under the changes.

The PCC and the new fund pathway were among the initiatives unveiled at ABS’ 53rd dinner, at which MAS and ABS announced that they were enhancing Singapore’s PayNow infrastructure and creating a Future of Finance Institute to boost fintech innovation.

ABS also launched a playbook to better serve the banking needs of seniors, with measures such as adding ATMs, branches and cash points, and clearer processes during family bereavement.

Source: The Business Times © SPH Media Limited. Permission required for reproduction.

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