Income-Allianz deal: MPs raise concerns about government blocking foreign investment deals, impact on reputation

SINGAPORE: Members of Parliament (MPs) on Wednesday (Oct 16) raised concerns that government intervention in corporate deals could affect Singapore’s business-friendly reputation, after a proposed deal between Income Insurance and German insurance was blocked.
Nearly 20 MPs from both sides of the House spoke on the Insurance (Amendment) Bill, in a debate that lasted close to four hours.
The Bill was tabled on Monday to provide a “clear statutory basis” for the Ministry of Culture, Community and Youth’s (MCCY) views to be considered in applications related to insurers that are either a co-op or linked to a co-op. 
The Bill was passed with seven abstentions from the Workers’ Party. The Progress Singapore Party supported the law.
Minister for Culture, Community and Youth Edwin Tong, Second Minister for Finance Chee Hong Tat and deputy secretary-general of the National Trades Union Congress (NTUC) Desmond Tan addressed MPs’ concerns.
Several MPs asked whether NTUC was aware of the details of the deal between Income and Allianz, which involved a capital reduction plan.
Mr Tan said that NTUC’s central committee only found out about it on Monday, when it was announced in parliament.
MPs said they were concerned that the government’s intervention in a foreign investor’s business deal could affect how investors see Singapore.
“How can we ensure that our regulatory environment remains predictable and welcoming for foreign investments?” asked MP Yip Hon Weng (PAP-Yio Chu Kang).
He noted that Singapore has a strong reputation as a pro-business country and questioned if the “discretionary power” could be perceived as a barrier and make global insurers hesitant to invest here.
MP Liang Eng Hwa (PAP-Bukit Panjang) called on the government to reaffirm its policy of being open to foreign investments. 
He said he was concerned about whether the rejection of the Income-Allianz deal would impact Singapore’s reputation as a global hub that welcomes international investments. 
“We have never been averse to foreign investors acquiring Singapore companies,” he said.
In response, Mr Chee said Singapore remains committed to being an “open, rules-based and pro-enterprise business hub”. 
The Monetary Authority of Singapore’s (MAS) regulatory approach is consultative and provides stability and predictability for industry players, he added. 
He also noted the law will not affect any other insurer or the financial industry at large.
Nominated MP Neil Parekh said “national treasures” such as Income should be handled differently. 
“In my view, control of such carefully nurtured national treasures should never be passed on to foreigners,” said Mr Parekh.
After the deal was proposed, concerns were raised over whether the goals of Allianz – being a foreign, for-profit company – would be in line with the original social mission of Income Insurance.
Mr Parekh said he agrees that Income needs to be strengthened, but that it should not mean “ceding control to foreigners”.
He suggested that the company needs a “Singaporean-controlled board of directors with real talent, real experience and a real vision” to come up with a coherent seven-year business plan. 
“We have accomplished that in other sectors and I see no reason why we cannot accomplish the same for our insurance business,” he said. 
Mr Chee said that if the concerns of MCCY can be addressed in a future deal, the government would consider it, whether it is from a foreign or local entity.
“The most important consideration is the outcome – that Income becomes a stronger entity that is able to serve its policyholders well and fulfil its social mission effectively,” he said.
There were also concerns that the government was retrospectively changing the law to block the deal.
“As far as possible, the government should rely on existing laws when assessing deals for regulatory approval,” said Non-constituency MP Hazel Poa (PSP).
“This provides confidence to investors here and abroad that our regulatory framework is stable.
“Even though the Bill we are debating today is tightly scoped, the fact that we are amending the law today so that a specific pending acquisition application can be blocked may be unsettling to investors.”
She cited existing sections of the Insurance Act, which she said suggest that MAS already has the discretion not to approve the application.
Mr Chee said there is currently no provision within the Act that allows MAS to consider the views of MCCY when the insurer involved is a co-operative or is linked to one.
The amendment allows the minister in charge of MAS to consider the views of the minister responsible for the administration of the Co-operative Societies Act.
NMP Usha Chandradas also raised concerns about the “enactment of legislation contemporaneously”.
“We need to be careful that we are not inadvertently sending a message to the world at large that it is possible for corporate deals to be suddenly overturned by the government, for legislation to be rushed through and for carefully planned corporate negotiations to be disrupted,” she said.
 
She sought clarity on when the level of public interest is deemed significant enough for the government to intervene, as it did in the case of the Income-Allianz deal.
“I think more detailed explanations here will go some way towards assuring businesses and the general public that this is not something that Singapore does regularly or on a whim,” she said.
In his closing speech, Mr Chee said the law was not being applied retrospectively as there was “no formal application yet by Allianz to obtain effective control and become a substantial shareholder of Income”.
Instead, the terms of the proposed transaction clearly stated it was subject to regulatory approval by MAS, he said.
The Bill is an exception due to its urgency because the deal with Allianz is under consideration by shareholders, Mr Chee added. 
He said that it is tightly scoped to co-operative insurers or those with a co-operative as a substantial shareholder. 
“This recognises that insurance co-ops are a special category of insurers with a social mission,” he said.
The coordination and sharing of information between government bodies was also a concern raised by MPs on Wednesday.
MP Jamus Lim (WP-Sengkang) said it was “troubling” that there was no coordinated discussion between the two regulators, MAS and MCCY, about the proposed deal.
He questioned if agencies within Singapore’s civil service have become isolated to the extent that no joint working group was set up to exchange information for such a prominent transaction.
He said it appears that there were “multiple breakdowns of communication” between different government agencies.
This case may be a sign that Singapore needs to examine how government departments exchange relevant data and information, said Assoc Prof Lim.
NMP Mark Lee also said Monday’s ministerial statement highlighted a delay in MCCY’s involvement. 
“Perhaps earlier involvement of relevant agencies could have flagged potential deal breakers sooner, enabling businesses to address concerns early and avoid public intervention,” said Mr Lee.
In response, Mr Chee said there needs to be a balance between sharing information with the government and keeping commercial details confidential.
Information given to MAS by financial institutions is confidential and normally would not be shared with government agencies.
“We recognise that companies submit such information for a specific regulatory purpose and not to enable general government evaluation,” said Mr Chee.
He also said that the proposal was still being assessed at the time, and the MAS only saw that Income’s planned capital reduction and cash remittance could be relevant to MCCY’s views on the transaction. 
Mr Tong said after MCCY reviewed the information, it decided that the deal was not in the public interest and decided to table amendments to the Insurance Act.
The amendments are scoped narrowly, rather than seeking broad powers, he said.
“We have chosen to act in this way because we feel that’s the most transparent and above-board manner,” he said.
“It will uphold rather than diminish Singapore’s consistent reputation as a hub for business that is open, transparent and rules-based.”