ADGIRM Advanced Diploma In General Insurance And Risk Management

Correct: The General Insurance Association of Singapore (GIA) is a trade association that represents the interests of general insurance member companies. A core objective is to promote and maintain high standards of ethical conduct and professional practice within the industry. It achieves this by developing and implementing codes of practice, such as the General Insurance Code of Practice, which provides guidelines on market conduct, including the appropriate handling of gifts and entertainment to ensure fair dealing and industry integrity.

Incorrect: The GIA is a self-regulatory trade body, not a statutory regulator; the power to issue or revoke licenses rests with the Monetary Authority of Singapore (MAS). While the GIA promotes fair practice, it does not manage a compensation fund for marketing malpractice; dispute resolution is typically handled by the Financial Industry Disputes Resolution Centre (FIDReC). Additionally, the GIA does not set or standardize premium rates or commissions, as price-fixing would generally contravene the Competition Act and the principles of a free market overseen by the Competition and Consumer Commission of Singapore (CCCS).

Takeaway: The GIA functions as a self-regulatory body that enhances industry professionalism by establishing ethical codes of conduct for its member insurers in Singapore.

Correct: A specialized reinsurance broker in Singapore is expected to provide technical expertise by analyzing the ceding company’s portfolio. This ensures that the treaty structure (such as the quota share or surplus limits) aligns with the insurer’s risk appetite and regulatory capital requirements. Under the MAS framework, effective reinsurance management is critical for solvency, and the broker’s role is to facilitate a placement that provides genuine risk transfer and capital efficiency.

Incorrect: The suggestion that a broker acts as a risk-bearer or guarantor is incorrect as brokers are intermediaries and do not provide financial guarantees for reinsurer performance. Focusing solely on commissions would be a breach of fiduciary duty and ethical standards expected in the Singapore insurance market. Simply replicating old wordings without review is a failure in professional diligence, as treaty terms must evolve with the insurer’s changing risk profile and current market conditions to remain effective.

Takeaway: The specialized reinsurance broker’s value lies in aligning treaty structures with the insurer’s strategic risk objectives and Singapore’s regulatory solvency expectations through technical portfolio analysis.

Correct: In accordance with MAS Guidelines on Risk Management Practices and MAS Notice 126 (ERM), insurers must actively manage concentration risks. Using facultative reinsurance allows the insurer to transfer specific risks that exceed internal limits on a case-by-case basis, while restructuring treaty reinsurance (such as Catastrophe Excess-of-Loss) ensures that the aggregate exposure to a single event in a concentrated geographic area like Jurong Island is mitigated to within the insurer’s net risk appetite.

Incorrect: Ceasing all underwriting is an extreme measure that ignores the strategic growth objective and does not specifically address the geographic concentration issue. Increasing premiums does not reduce the physical concentration of risk or the potential PML; it only addresses pricing, not the capacity breach. Arbitrarily raising the risk appetite threshold to match a breach, without a fundamental change in risk capacity or capital strategy, undermines the integrity of the ERM framework and would likely be flagged by MAS during a supervisory review.

Takeaway: Effective management of geographic concentration risk in Singapore requires the strategic use of reinsurance to align actual exposure with the Board-approved risk appetite without compromising business growth goals.

Correct: In Singapore, the General Insurance Association (GIA) Barometer of Liability (BOL) is an industry-wide agreement designed to provide a common and consistent basis for motor insurers to settle claims efficiently. It serves as a guide for standard accident scenarios. However, it is not a substitute for the law, and claims handlers must still consider the specific facts of the case. If clear evidence like dashcam footage proves a scenario differs from the standard BOL model, the insurer should adjust the liability assessment accordingly to reflect the actual circumstances of the accident.

Incorrect: The approach suggesting the BOL is a rigid legal statute is incorrect because the BOL is an industry guide and agreement among GIA members, not a piece of legislation like the Securities and Futures Act or the Insurance Act. The suggestion that it only applies to claims below the FIDReC threshold is a misconception; the BOL is used across the industry for liability assessment regardless of the claim size. Finally, the BOL is intended for use in all motor accident claims involving GIA member companies, not just commercial vehicles, to ensure a standardized approach across the entire Singapore motor insurance market.

Takeaway: The GIA Barometer of Liability is a standardized industry guide used by Singapore insurers to facilitate fair and efficient fault assessment, though it allows for adjustments based on specific case evidence.

Correct: Under the Singapore Insurance Act, insurance business is divided into life business and general business. While life business typically involves long-term mortality risks, general business includes personal accident and health policies that are short-term in nature (usually renewable annually or for a period of less than 5 years). A Personal Accident policy that provides a benefit for death resulting specifically from an accident is legally categorized as general business.

Incorrect: The assertion that any death benefit automatically makes a policy ‘life business’ is incorrect because the Insurance Act allows general insurers to provide benefits for death caused by accident. The term ‘composite’ refers to an insurer’s corporate license to conduct both life and general business, but it is not a specific classification for a standard personal accident product. There are no provisions in the Insurance Act that exempt a product from classification based on its bundling with wealth management or the method of premium payment.

Takeaway: Under the Singapore Insurance Act, short-term personal accident policies providing accidental death benefits are classified as general insurance business rather than life insurance business.

Correct: In the context of D&O insurance in Singapore, underwriters must focus on the quality of management and corporate governance. Since D&O policies cover ‘wrongful acts’ by directors, a robust governance framework and a history of compliance with MAS regulations (such as the SFA) are the most reliable indicators of a lower risk profile. Effective internal controls and transparent reporting reduce the probability of regulatory investigations or shareholder derivative suits, which are primary drivers of D&O claims.

Incorrect: Focusing on assets under management or fund volatility relates more to investment risk or commercial success rather than the legal liability of directors for management failures. While professional development is important, the qualifications of entry-level staff are less relevant to D&O risk than the conduct of senior management. The physical location of the office is a property or operational risk factor and has no bearing on the professional liability or regulatory compliance risk of the firm’s leadership.

Takeaway: Underwriting D&O insurance in Singapore requires a primary focus on the strength of corporate governance and the firm’s history of compliance with MAS regulatory standards to mitigate management liability risks.

Correct: In the Singapore regulatory landscape, specifically under the MAS Guidelines on Risk Management Practices, the Three Lines of Defence model requires a clear distinction between those who take risks (First Line) and those who oversee risks (Second Line). The second approach is correct because the First Line must have primary ownership and accountability for the risks they generate. The Second Line’s role is to establish the risk management framework and provide independent challenge. If the Risk Management Department were to approve individual pricing models or transactions, they would become part of the risk-taking process, thereby compromising their independence and ability to provide objective oversight.

Incorrect: The first approach is incorrect because having the Second Line approve individual pricing models blurs the lines of defense and creates a conflict of interest where the risk function is essentially auditing its own decisions. The reference to the MAS IAC Guidelines is misinterpreted; while IAC emphasizes accountability, it does not mandate that risk officers become operational decision-makers. The suggestion that RBC 2 requirements necessitate Second Line operational control is also incorrect, as RBC 2 is a capital adequacy framework that does not override governance principles. Finally, the suggestion that Internal Audit should perform daily monitoring is incorrect because the Third Line must provide periodic, independent assurance rather than participating in daily operational activities.

Takeaway: Effective risk governance in Singapore insurance requires the First Line to own risk and the Second Line to maintain independence for objective oversight and challenge.

Correct: In Singapore, subrogation and contribution are distinct legal principles that support the principle of indemnity. Subrogation allows an insurer who has paid a claim to ‘step into the shoes’ of the insured to recover the loss from a liable third party (the contractor). Contribution applies in cases of double insurance, where the insurer who paid the full loss has an equitable right to recover a proportionate share from other insurers who are also liable for the same loss. These rights can be exercised independently to ensure the insurer only bears its fair share and the negligent party is held accountable.

Incorrect: The suggestion that subrogation must be exhausted before contribution can be sought is incorrect, as these are independent rights. The idea that an insured can collect the full sum from both insurers simultaneously violates the principle of indemnity, which prevents an insured from profiting from a loss. Finally, there is no legal rule in Singapore that waives subrogation rights simply because a contribution claim has been initiated; they serve different purposes—one for third-party recovery and the other for loss-sharing between insurers.

Takeaway: Subrogation and contribution are independent legal mechanisms in Singapore that uphold the principle of indemnity by allowing insurers to recover from liable third parties and share losses among concurrent insurers respectively.

Correct: As the primary regulator, the Monetary Authority of Singapore (MAS) operates a risk-based supervisory framework. Under the Insurance Act and relevant MAS Notices, insurers are expected to maintain high standards of governance and transparency. When a material issue such as a solvency-threatening control failure is identified, the insurer is duty-bound to notify the MAS promptly. This allows the regulator to assess the systemic risk and ensure that the rectification plan is robust enough to protect policyholders’ interests.

Incorrect: Waiting until the next annual statutory return is inappropriate because MAS requires timely notification of material adverse developments to maintain financial stability. Relying solely on an external auditor’s determination of negligence before reporting ignores the insurer’s primary responsibility to be transparent with the regulator regarding any significant risk. While improving solvency is necessary, taking drastic actions like ceasing all new business or liquidating assets without prior consultation with the MAS could lead to market instability and fails to respect the MAS’s role in supervising significant changes to an insurer’s business operations.

Takeaway: The Monetary Authority of Singapore (MAS) requires licensed insurers to maintain transparency and provide timely notification of material control failures or solvency issues to ensure effective regulatory oversight and policyholder protection.

Correct: In Singapore, under the Insurance Act and relevant MAS Notices, the Appointed Actuary (AA) has a statutory responsibility to ensure the adequacy of technical reserves, which include both Claim Liabilities and Premium Liabilities. The AA must remain independent of the commercial pressures of the underwriting department. If underwriting practices lead to premium inadequacy, the AA is required to reflect this in the Premium Deficiency Reserve (PDR) and has a duty to report such risks to the Board of Directors to ensure the insurer’s solvency and financial soundness are not compromised by short-term profit targets.

Incorrect: Delegating the determination of reserves to the underwriting department is a violation of the AA’s independent duty and creates a severe conflict of interest. Annual reviews are insufficient for effective oversight, as the AA must provide timely actuarial opinions on the state of reserves to protect policyholders. Reducing reserves based on speculative future premium income is actuarially unsound and contradicts the principle of prudence required by MAS, as technical reserves must be based on the current portfolio’s expected liabilities and expenses.

Takeaway: The Appointed Actuary must provide independent oversight of underwriting impacts on technical reserves and report directly to the Board to safeguard the insurer’s financial soundness against aggressive commercial targets.

Correct: Under MAS Notice 322, the Board and Senior Management of an insurer are ultimately responsible for the management of market risk. This responsibility cannot be outsourced. The insurer must have the internal capability to understand, monitor, and challenge the risk reports provided by third-party managers. This includes ensuring that the external manager’s actions and risk levels remain consistent with the insurer’s Board-approved Risk Appetite Statement and internal risk limits.

Incorrect: Mandating a specific standardized approach for the manager’s internal modeling is not a core requirement of Notice 322, which focuses on the insurer’s oversight framework. Relying on legal indemnities or certifications from the service provider is insufficient because the insurer must maintain active oversight and cannot abdicate its regulatory accountability. While the appointed actuary has roles in valuation, the primary responsibility for market risk oversight under Notice 322 rests with the Board and Senior Management through a dedicated risk management function.

Takeaway: Insurers must retain internal expertise to independently validate and oversee market risks in outsourced portfolios to satisfy MAS Notice 322 requirements.

Correct: In accordance with the MAS Guidelines on Fair Dealing and the Financial Advisers Act (FAA) framework in Singapore, intermediaries have a duty to act with integrity and prioritize the interests of their clients. Managing conflicts of interest involves identifying potential biases, such as higher commissions or volume-based overrides, and disclosing these to the client. The recommendation must be based on the client’s specific insurance needs and risk profile rather than the intermediary’s financial gain.

Incorrect: The suggestion that similar policy terms waive the need for disclosure is incorrect because the incentive itself creates a conflict that must be managed under professional conduct standards. Relying solely on standard product summaries is insufficient for managing specific conflicts related to intermediary incentives. While fee-based models are an option, they are not the only recognized method; commission-based models are permitted in Singapore provided that conflicts are properly disclosed and the advice remains suitable and client-centric.

Takeaway: In the Singapore insurance market, managing conflicts of interest requires intermediaries to maintain transparency through disclosure and ensure that client suitability always takes precedence over intermediary remuneration.

Correct: The Financial Industry Disputes Resolution Centre (FIDReC) in Singapore primarily handles disputes between financial institutions and consumers (individuals or sole proprietors). For general insurance claims, the jurisdictional limit is currently set at S$100,000 per claim. A robust internal control ensures that the insurer correctly identifies eligible claimants and claim amounts, facilitating the proper transition from internal dispute resolution (IDR) to FIDReC if a settlement cannot be reached.

Incorrect: Diverting large corporate disputes to FIDReC is incorrect because FIDReC’s services are specifically for individuals and sole proprietors, not large corporations. Requiring a mediation proposal to be binding on the consumer is contrary to FIDReC’s structure, where the adjudication award is binding on the financial institution but not the consumer. The S$250,000 threshold is incorrect as the standard jurisdictional limit for general insurance claims at FIDReC is S$100,000.

Takeaway: FIDReC provides an accessible dispute resolution mechanism for individuals and sole proprietors in Singapore, with a jurisdictional limit of S$100,000 per claim for general insurance matters.

Correct: Under the Securities and Futures Act (SFA), insurance-linked securities (ILS) and derivatives are generally classified as capital markets products. Therefore, any entity dealing in these products in Singapore must hold a Capital Markets Services (CMS) license issued by the Monetary Authority of Singapore (MAS), unless they fall under specific exemptions (such as those for banks or certain types of institutional dealings). Risk assessment of a third party must verify this licensing status to mitigate legal and regulatory risk.

Incorrect: The suggestion that the Insurance Act provides a blanket exemption is incorrect because if an instrument is structured as a security or derivative, the SFA applies concurrently. The claim that a full prospectus is always required is false, as the SFA provides exemptions for offers made to ‘accredited’ or ‘institutional’ investors under Part XIII. The Financial Advisers Act governs the provision of financial advice, but the actual dealing and structuring of these capital markets products are primarily regulated under the SFA.

Takeaway: Entities dealing in insurance-linked securities and derivatives in Singapore must navigate the licensing requirements of the Securities and Futures Act to ensure legal counterparty operations.

Correct: In Singapore, the Monetary Authority of Singapore (MAS) expects insurers to manage reinsurance counterparty credit risk prudently. Since the primary insurer remains legally liable to policyholders regardless of the reinsurance arrangement, securing the reinsurer’s obligations with high-quality collateral (such as Letters of Credit from MAS-licensed banks or funds held in trust) is a standard and effective risk mitigation strategy. This ensures that the primary insurer has immediate access to funds if the reinsurer fails to meet its obligations.

Incorrect: Increasing fronting fees does not provide immediate security against a large-scale default and does not address the underlying credit exposure. Comfort letters are generally not legally binding and do not provide the same level of security as asset-backed collateral. While cut-through clauses exist, they do not typically absolve the primary insurer of its regulatory and contractual obligations to the policyholder under Singapore law, and MAS expects the primary insurer to maintain oversight and financial responsibility for the risks it fronts.

Takeaway: To mitigate credit risk in fronting arrangements, primary insurers should secure reinsurance recoverables with tangible collateral like Letters of Credit or trust accounts to ensure policyholder protection.

Correct: Under Section 49L of the Singapore Insurance Act, a Trust Nomination creates a statutory trust for the benefit of the policy owner’s spouse and/or children. Once this nomination is made, the policy owner divests themselves of the beneficial interest in the policy. Consequently, the policy owner cannot revoke the nomination, surrender the policy, or even take a policy loan without the explicit written consent of the nominees (or their trustees/parents if they are minors). This creates a significant legal constraint that must be reflected in an insurer’s risk and liquidity models.

Incorrect: The suggestion that a Revocable Nomination (Section 49M) requires nominee consent is incorrect because the policy owner retains full ownership and control over the policy during their lifetime. The claim that Section 49L allows any person to be a nominee is false; statutory trusts under Section 49L are strictly limited to the spouse and/or children of the policy owner. The assertion that both nomination types offer identical creditor protection is incorrect, as only a Trust Nomination (Section 49L) creates a statutory trust that generally protects proceeds from the policy owner’s creditors, whereas a Revocable Nomination does not offer the same level of protection.

Takeaway: A Trust Nomination under Section 49L of the Insurance Act creates a statutory trust for spouse and children that divests the owner of control, whereas a Revocable Nomination under Section 49M allows the owner to retain full policy rights.

Correct: In Singapore, captive insurers are regulated under the Insurance Act. The Monetary Authority of Singapore (MAS) requires a captive insurer to have a minimum paid-up capital of S$400,000. Furthermore, the primary business of a captive insurer must be the underwriting of risks of its parent and related corporations, rather than the general public.

Incorrect: The approach involving the Securities and Futures Act is incorrect because captive insurers are governed by the Insurance Act, and captives are generally restricted from underwriting significant unrelated third-party risks. The approach suggesting a S$100,000 capital requirement is incorrect as the statutory minimum for captives is S$400,000, and MAS typically requires a local presence or a licensed captive manager. The approach involving the Financial Advisers Act is incorrect because that Act regulates financial advisory services, not the underwriting activities of a captive insurer.

Takeaway: A captive insurer in Singapore must be licensed under the Insurance Act, maintain at least S$400,000 in paid-up capital, and focus on insuring the risks of its own corporate group members.

Correct: Under the Work Injury Compensation Act (WICA) in Singapore, it is mandatory for employers to buy work injury compensation insurance for two categories of employees: all employees doing manual work (regardless of their salary level) and all employees doing non-manual work who earn a monthly salary of 2,600 Dollars or less. This ensures that those in higher-risk physical roles or lower-income brackets have guaranteed access to compensation for work-related injuries.

Incorrect: The suggestion that only manual workers require insurance is incorrect because the law specifically includes non-manual workers below a certain salary threshold. The claim that all employees must be insured regardless of job scope or salary after six months is inaccurate as the mandate is based on job nature and salary, not tenure. Reversing the salary threshold to apply only to those earning above 2,600 Dollars is incorrect, as the mandatory protection is designed to safeguard lower-wage non-manual workers.

Takeaway: In Singapore, mandatory WICA insurance applies to all manual workers and non-manual workers earning 2,600 Dollars or less per month to ensure essential protection for vulnerable groups of employees.

Correct: Under the MAS Guidelines on Risk Management Practices for Insurance Business, the Board and senior management of a Singapore insurer are ultimately responsible for the reinsurance management strategy. While specialized brokers provide valuable market intelligence and placement services, the insurer must maintain independent oversight. A formal internal review ensures that the treaty wordings accurately reflect the insurer’s specific risk appetite and technical requirements, preventing ‘silent’ exposures or coverage gaps that a broker’s standard wording might not address.

Incorrect: Relying on a broker’s standard wordings or proprietary ratings (options b and c) constitutes an over-reliance on third parties, which contradicts MAS expectations for insurers to perform their own due diligence and maintain internal expertise. Granting full discretionary authority to a broker (option d) creates a significant conflict of interest and represents a failure of corporate governance, as the insurer abdicates its responsibility for critical risk transfer decisions.

Takeaway: Insurers must maintain independent technical oversight and align all treaty negotiations with their internal Reinsurance Management Strategy rather than delegating core risk decisions to brokers.

Correct: The approach in option_a is correct because the Monetary Authority of Singapore (MAS) Guidelines on Risk Management Practices for Insurance Business emphasize that insurers should have a robust risk assessment process. This involves a holistic view that combines quantitative data (historical claims) with qualitative assessments, such as the proposer’s adherence to local safety standards like the Workplace Safety and Health Act, to accurately identify and price the specific risks being underwritten.

Incorrect: The approach in option_b is incorrect because ‘following the market’ or benchmarking solely against GIA averages ignores the specific risk characteristics of the individual proposer, which can lead to adverse selection and inadequate pricing. The approach in option_c is incorrect because while financial stability is important, it does not account for the physical or operational hazards that are the primary drivers of general insurance claims. The approach in option_d is incorrect because ignoring local Singaporean regulations like the PDPA or specific local environmental factors in favor of a global template can lead to significant gaps in risk identification and potential regulatory breaches.

Takeaway: Effective underwriting in Singapore requires a holistic approach that combines historical data with qualitative assessments of risk management and local regulatory compliance.

Correct: In accordance with the MAS Guidelines on Risk Management and Corporate Governance, the independence of control functions like Compliance is paramount. A direct reporting line to the Board or a Board Committee (such as the Board Risk Committee) ensures that the Compliance Officer can escalate issues without fear of retribution from executive management. Furthermore, to prevent conflicts of interest, their remuneration must not be linked to the financial performance of the business units they monitor, as this preserves their objectivity when identifying and reporting breaches.

Incorrect: Reporting to the Chief Underwriting Officer or being integrated into the business development team creates a fundamental conflict of interest, as these business functions prioritize production and revenue over regulatory oversight. Linking the Compliance Officer’s bonus to Gross Written Premium targets is a direct violation of independence principles, as it incentivizes the officer to overlook compliance failures that might otherwise hinder the firm’s sales performance.

Takeaway: The independence of the Compliance Officer is best secured through a direct reporting line to the Board and a remuneration structure that is decoupled from the financial targets of the business units.

Correct: Under the Singapore Insurance Act, the distinction between life and general business is fundamental for licensing and fund separation. While both life and general insurers can write accident and health (A&H) business, the Act specifically includes long-term accident and health policies within the definition of a life policy. Therefore, policies that are long-term and typically non-cancellable by the insurer must be classified as life business and managed within a life insurance fund rather than a general insurance fund to ensure compliance with MAS solvency and capital requirements.

Incorrect: Option B is incorrect because the Insurance Act allows both life and general insurers to write A&H business, but the classification depends on the policy’s duration and terms; it is not restricted to general business. Option C is incorrect because while investment-linked components are a feature of certain life policies, they are not the sole determinant for distinguishing between life and general business under the Act. Option D is incorrect because there is no statutory rule that automatically reclassifies all contracts over twelve months as life business; many general insurance products, such as construction or marine hull policies, often have durations exceeding one year.

Takeaway: In Singapore, long-term and non-cancellable accident and health policies are classified as life business under the Insurance Act, requiring distinct fund management from general insurance business.

Correct: Under Section 150 of the Singapore Insurance Act, an insurer may pay up to S$150,000 of the policy moneys to a ‘proper claimant’ (which includes a spouse, child, parent, sibling, nephew, or niece) without the production of a Grant of Probate or Letters of Administration. This provision is intended to provide immediate financial relief to the family of the deceased when there is no nomination or will immediately available, provided the insurer has no notice of any other competing claims or formal legal representation being granted.

Incorrect: The suggestion that MAS must provide an indemnity is incorrect as MAS does not involve itself in individual claim approvals or indemnities. The claim that all funds must go to the Public Trustee is a misunderstanding of the Intestate Succession Act; the Insurance Act specifically provides the S$150,000 carve-out for insurers. The S$50,000 limit is outdated or incorrect, as the current statutory limit defined in the Singapore Insurance Act for payment to a proper claimant without probate is S$150,000.

Takeaway: In Singapore, the Insurance Act allows insurers to pay up to S$150,000 to defined proper claimants without requiring probate, facilitating faster claims processing for small to medium estates.

Correct: Under the MAS Guidelines on Risk Management Practices for Insurance Business, insurers are expected to have a disciplined approach to underwriting and pricing. While commercial considerations are part of the business, the technical price (which covers expected claims, expenses, and a profit margin) serves as a benchmark. Any material deviation from this price must be governed by a clear framework that includes documentation of the rationale, monitoring of the impact on the portfolio, and adherence to delegated authority limits and the overall risk appetite set by the Board.

Incorrect: Prioritizing market share over technical pricing without a formal justification process can lead to inadequate premium levels and financial instability. While actuarial data is indeed backward-looking, ignoring it entirely for commercial gain is a failure of risk management. Conversely, while technical pricing is a critical benchmark, MAS guidelines do not strictly prohibit all deviations; rather, they require that such deviations be managed and controlled. Cross-subsidizing by unfairly increasing premiums for other customer segments would likely violate the MAS Guidelines on Fair Dealing – Board and Senior Management Responsibility for Delivering Fair Dealing Outcomes to Customers.

Takeaway: In Singapore’s regulatory framework, underwriting deviations from actuarial technical prices must be justified, documented, and kept within Board-approved risk appetite limits to ensure financial soundness and fair pricing practices.

Correct: The Singapore College of Insurance (SCI) is the designated industry training and examination body. Its primary role includes conducting the CMFAS examinations (such as M5, M8, and M9) which are essential for individuals seeking to provide financial advisory services in Singapore. It also develops professional qualification programs and facilitates Continuous Professional Development (CPD) to maintain high standards of competency within the insurance and financial services sectors as required by MAS guidelines.

Incorrect: The option suggesting SCI issues licenses is incorrect because the Monetary Authority of Singapore (MAS) is the sole regulator responsible for licensing and enforcement. The option regarding the compensation fund is incorrect as the Policy Owners’ Protection Scheme is administered by the Singapore Deposit Insurance Corporation (SDIC). The option regarding setting capital frameworks is incorrect because MAS, not the SCI, is responsible for prudential supervision and setting solvency requirements for the insurance industry.

Takeaway: The Singapore College of Insurance (SCI) serves as the central hub for professional examinations and training to ensure industry practitioners meet the competency standards required by Singapore’s regulatory framework.

Correct: In accordance with MAS Guidelines on Corporate Governance and Risk Management, the CRO must maintain independence from the business units (the first line of defense). A dual reporting line to the Chief Executive Officer (for operational matters) and the Board Risk Committee (for functional independence) is essential. This structure ensures the CRO can provide an objective, independent challenge to the insurer’s risk-taking activities and effectively oversee the Enterprise Risk Management (ERM) framework.

Incorrect: Reporting to the Chief Financial Officer is discouraged as it may lead to conflicts where financial reporting pressures override risk considerations. While the CRO oversees the risk framework, they should not be the final approver for individual underwriting transactions, as this is an operational ‘first line’ responsibility; the CRO’s role is to set the boundaries and monitor compliance. Integrating the CRO into Internal Audit is incorrect because it violates the ‘Three Lines of Defense’ model, which requires Internal Audit (the third line) to remain independent of the risk management function (the second line) to evaluate its effectiveness.

Takeaway: The CRO must maintain functional independence through a direct reporting line to the Board Risk Committee to provide objective oversight of the insurer’s risk profile.

Correct: In Singapore, independent loss adjusters are expected to maintain a high level of professional integrity and impartiality. Although they are typically appointed and remunerated by the insurer, their duty is to investigate the loss objectively, determine the proximate cause, and quantify the loss based on the actual terms and conditions of the insurance policy. They must provide a fair assessment that reflects the facts of the incident, ensuring that the claim is settled equitably for both the insurer and the insured.

Incorrect: The suggestion that an adjuster acts as a dedicated representative to justify repudiation is incorrect because it violates the principle of impartiality required in professional loss adjustment. The idea that an adjuster’s priority is to maximize the payout regardless of exclusions is also incorrect, as they must adhere strictly to the policy contract. Finally, loss adjusters are not legal advisors; their role is technical and factual assessment rather than providing legal counsel on the Insurance Act to minimize liability.

Takeaway: Independent loss adjusters in Singapore must provide an unbiased and factual assessment of claims to ensure fair settlement according to the insurance contract’s terms.

Correct: In Singapore, the Consumer Protection (Fair Trading) Act (CPFTA) was amended to include financial services. It provides consumers with a right of action against suppliers who engage in unfair practices, such as making false or misleading claims. For an insurer, this means that marketing materials and sales scripts must be accurate, as the CPFTA complements the Insurance Act and the Financial Advisers Act by providing a specific statutory mechanism for consumer redress in cases of deceptive conduct.

Incorrect: The approach of relying on caveat emptor is incorrect because the CPFTA specifically shifts the burden to ensure fair practices and does apply to financial services. Restricting standards only to the formal policy document is incorrect because the CPFTA covers the entire transaction, including pre-contractual representations and marketing. Limiting the Act to commercial contracts is incorrect because the CPFTA is primarily designed to protect individual consumers, not large commercial entities, and the principle of Utmost Good Faith does not negate the statutory protections against unfair practices provided by the CPFTA.

Takeaway: The Consumer Protection (Fair Trading) Act provides Singaporean consumers with statutory protection against unfair practices in insurance, requiring insurers to ensure all representations made during the sales process are truthful and not misleading.

Correct: MAS adopts a Risk-Based Supervision (RBS) framework for the insurance industry in Singapore. This approach involves assessing the risk profile of each insurer and the impact its failure would have on the financial system and policyholders. By focusing more intensive supervision on higher-risk or systemically important institutions, MAS can effectively maintain financial stability and protect consumers without imposing unnecessary costs on lower-risk entities.

Incorrect: Focusing solely on industry development is incorrect because MAS has a dual mandate that includes prudential and conduct supervision to ensure financial stability. Mandating uniform capital requirements is incorrect because Singapore uses a Risk-Based Capital (RBC 2) framework where capital requirements are tailored to the specific risk exposures of each insurer. Delegating all prudential supervision to self-regulatory bodies is incorrect as MAS is the statutory regulator under the Insurance Act and maintains direct oversight of all licensed insurers.

Takeaway: MAS utilizes a risk-based supervisory framework to prioritize its oversight based on the impact and risk profile of insurers within the Singapore financial ecosystem.

Correct: Under Section 8 of the Insurance Act of Singapore, no person shall carry on any class of insurance business in Singapore as an insurer unless the person is registered by the Monetary Authority of Singapore (MAS) in respect of that class of business. This registration is mandatory for any entity acting as an insurer within the jurisdiction to ensure they meet the necessary capital, solvency, and conduct standards set by the regulator.

Incorrect: Registering with the Accounting and Corporate Regulatory Authority (ACRA) is a general requirement for companies but does not grant authority to conduct regulated insurance activities. The Securities and Futures Act (SFA) definitions of sophisticated or accredited investors apply to capital markets activities and do not provide a general exemption for insurers from the registration requirements of the Insurance Act. Furthermore, soliciting and providing insurance to Singapore residents, even if the underwriting occurs abroad, generally constitutes carrying on insurance business in Singapore, which requires MAS registration to protect local policyholders.

Takeaway: Any entity intending to carry on insurance business in Singapore must be registered as an insurer with the Monetary Authority of Singapore (MAS) under the Insurance Act.