Framework for Levy Imposition and Payment under the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011
The Deposit Insurance and Policy Owners’ Protection Schemes Act 2011 (the “Act”) establishes a comprehensive framework governing the imposition, computation, notification, payment, refund, and re-computation of levies payable by Policy Owners’ Protection Fund (PPF) Scheme members. This framework is critical to ensuring the financial sustainability of the PPF Life Fund and PPF General Fund, which provide compensation to policy owners in the event of insurer insolvency. The relevant provisions, primarily found in Sections 37 to 45 of the Act, also regulate confidentiality obligations and prescribe penalties for non-compliance, thereby safeguarding the integrity of the levy system.
Section 37: Mandatory Levy Payment by PPF Scheme Members
"Every PPF Scheme member must pay a levy for any premium year or part thereof in respect of the insured policies issued by the PPF Scheme member." — Section 37(1), Deposit Insurance and Policy Owners’ Protection Schemes Act 2011
Verify Section 37 in source document →
Section 37(1) imposes a statutory obligation on every PPF Scheme member to pay a levy annually or for any part of the premium year in relation to the insured policies they have issued. This provision exists to ensure a steady inflow of funds into the PPF Life Fund and PPF General Fund, which are essential for compensating policy owners if an insurer fails. The levy acts as a financial safeguard, distributing the risk and cost of insurer insolvency across all participating members.
Further, Section 37(2) clarifies that the levy amount is subject to computation by the Authority, ensuring that levy rates are not arbitrary but based on a structured assessment:
"Subject to the provisions of this Act, the levy is of such amount as may be computed by the Authority under section 38." — Section 37(2)
Verify Section 37 in source document →
Additionally, the term “premium year” is defined by regulations prescribed under subsection (4) of Section 37, allowing flexibility in determining the levy period:
"The premium year for the PPF Scheme is the period prescribed in regulations made under subsection (4)." — Section 37(3)
Verify Section 37 in source document →
This regulatory mechanism allows the Authority to adapt the levy period to practical considerations, such as aligning with insurers’ accounting cycles.
Section 38: Levy Rate Assessment and Determination
"The Authority must assess and determine the levy rates for the purposes of computing the levies payable by PPF Scheme members." — Section 38(1)
Verify Section 38 in source document →
Section 38 mandates the Authority to assess and determine levy rates, which is fundamental to the levy framework. The Authority’s role ensures that levy rates are calculated based on objective criteria, reflecting the risk profile and insured policies of each PPF Scheme member. This assessment promotes fairness and financial prudence.
Moreover, Section 38(6) requires that insured policies covered under the PPF Life Fund be classified into categories as set out in the Second Schedule of the Act:
"For the purposes of computing the levies payable, insured policies covered under the PPF Life Fund must be classified into any of the categories in the Second Schedule." — Section 38(6)
Verify Section 38 in source document →
This classification system allows for differentiated levy rates that correspond to the risk characteristics of various policy types, thereby aligning levy contributions with potential liabilities.
Section 39: Notification of Levy Amounts
"Where the Authority has computed the amount of levy payable... the Authority must notify the Agency accordingly." — Section 39(1)
Verify Section 39 in source document →
Once the levy amounts are computed, Section 39(1) requires the Authority to notify the Agency. This notification process is crucial for transparency and administrative efficiency, enabling the Agency to issue payment notices to PPF Scheme members and maintain accurate records of levy obligations.
Section 40: Additional Levies in Case of Insufficient Funds
"Where, in the opinion of the Authority, there are insufficient moneys in the PPF Life Fund or the PPF General Fund (as the case may be) to pay any compensation... the Authority may... determine that PPF Scheme members are required to pay additional levies." — Section 40(1)
Verify Section 40 in source document →
Section 40 empowers the Authority to impose additional levies when the PPF Life Fund or PPF General Fund lacks sufficient funds to meet compensation obligations. This provision ensures the financial resilience of the protection schemes by allowing the replenishment of funds beyond the regular levy cycle.
However, Section 40(3) safeguards PPF Scheme members by requiring prior Ministerial approval before additional levies can be imposed:
"Despite subsections (1) and (2), no PPF Scheme member may, without the prior approval of the Minister, be required to pay additional levy... as the Minister may, by order in the Gazette, prescribe." — Section 40(3)
Verify Section 40 in source document →
This requirement introduces a check and balance, preventing arbitrary or excessive additional levies and ensuring that such decisions undergo governmental oversight.
Furthermore, Section 40(4) mandates the Authority to notify relevant details in the Gazette, promoting transparency:
"For the purposes of subsection (3), the insured policy base or gross premium income... must be determined on such date as the Authority may notify in the Gazette." — Section 40(4)
Verify Section 40 in source document →
Section 41: Payment of Levies and Enforcement
"Where any PPF Scheme member is given written notice to pay any levy... the PPF Scheme member must pay to the Agency on or before the date of payment specified in the notice." — Section 41(1)
Verify Section 41 in source document →
Section 41(1) imposes a clear obligation on PPF Scheme members to pay levies by the specified due date, ensuring timely funding of the protection schemes. To enforce compliance, Section 41(2)(a) authorises the Agency to impose late payment fees:
"If a PPF Scheme member fails to pay the levy or additional levy... the Agency may... impose on the PPF Scheme member such late payment fee as the Agency may by Rules determine." — Section 41(2)(a)
Verify Section 41 in source document →
This penalty mechanism incentivises punctual payment and mitigates the risk of funding shortfalls.
Additionally, Section 41(5) confirms that unpaid levies, additional levies, and late fees are recoverable as debts due to the Agency:
"Any levy, additional levy or late payment fee payable under this Act is recoverable as a debt due to the Agency by the PPF Scheme member." — Section 41(5)
Verify Section 41 in source document →
Section 41(6) further empowers the Agency to recover legal costs on a full indemnity basis when pursuing unpaid levies through legal proceedings:
"Where the Agency has commenced any legal proceedings... the Agency is entitled to claim costs on a full indemnity basis from that PPF Scheme member." — Section 41(6)
Verify Section 41 in source document →
These provisions collectively ensure that the levy payment system is enforceable and that the Agency can recover funds efficiently.
Section 42: Refunds and Remissions of Levies
"The Agency may, with the approval of the Minister, refund or remit in whole or in part any levy or additional levy paid or payable by any PPF Scheme member under this Act." — Section 42
Verify Section 42 in source document →
Section 42 provides flexibility for the Agency, subject to Ministerial approval, to refund or remit levies. This may occur in circumstances such as overpayment or changes in levy assessments, thereby ensuring fairness and preventing unjust enrichment of the Agency at the expense of PPF Scheme members.
Sections 43 and 44: Re-computation and Notification of Levy Amounts
Sections 43 and 44 address situations where levies have been incorrectly computed, either in excess or insufficient amounts.
"Where it appears to the Authority that a PPF Scheme member has paid any levy or additional levy in excess... the Authority must notify the Agency accordingly." — Section 43(1)
Verify Section 43 in source document →
This provision ensures that overpayments are identified and rectified promptly, preventing financial loss to PPF Scheme members.
"Where it appears to the Authority... that the levy or additional levy... is of an amount less than that which ought to have been computed... the Authority may... re-compute such amount." — Section 44(1)
Verify Section 44 in source document →
Conversely, Section 44(1) empowers the Authority to re-compute levies if underpayments are detected, maintaining the financial integrity of the protection funds.
Section 45: Confidentiality and Penalties for Disclosure
"Subject to subsections (2) and (3), no PPF Scheme member or officer of any PPF Scheme member may disclose to any person... the levy rate applicable... the category... the rating... any information which if disclosed, would enable any of the information... to be identified or deduced." — Section 45(1)
Verify Section 45 in source document →
Section 45(1) imposes strict confidentiality obligations on PPF Scheme members and their officers concerning levy-related information. This restriction exists to protect sensitive commercial information and prevent unfair competitive advantages or market manipulation arising from disclosure of levy rates or classifications.
To enforce this confidentiality, Section 45(4) prescribes severe penalties for contraventions:
"Any person who contravenes subsection (1) or (3) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $125,000 or to imprisonment for a term not exceeding 3 years or to both." — Section 45(4)
Verify Section 45 in source document →
The stringent penalties underscore the importance of maintaining confidentiality within the levy framework and deter breaches that could undermine the scheme’s effectiveness.
Definitions and Terminology in the Levy Provisions
The Act defines key terms to provide clarity and precision in the levy framework. For instance, the term “premium year” is prescribed by regulations under Section 37(4), allowing the Authority to specify the levy period:
"The premium year for the PPF Scheme is the period prescribed in regulations made under subsection (4)." — Section 37(3)
Verify Section 37 in source document →
The term “levy” is defined as the amount payable by PPF Scheme members as computed by the Authority under Section 38:
"The levy is of such amount as may be computed by the Authority under section 38." — Section 37(2)
Verify Section 37 in source document →
While “PPF Scheme member” is used throughout, it is not explicitly defined in this Part, but generally refers to insurers participating in the PPF Scheme. The “PPF Life Fund” and “PPF General Fund” are referenced as the funds covering insured policies, and “additional levies” are those imposed when funds are insufficient, as per Section 40(1):
"Where, in the opinion of the Authority, there are insufficient moneys in the PPF Life Fund or the PPF General Fund (as the case may be) to pay any compensation... the Authority may... determine that PPF Scheme members are required to pay additional levies." — Section 40(1)
Verify Section 40 in source document →
Cross-References and Ministerial Oversight
The levy provisions contain several cross-references to other parts of the Act and to Ministerial powers, ensuring a cohesive regulatory framework. For example, Section 37(2) states that levy computations are subject to the provisions of the Act, implying interplay with other sections:
"Subject to the provisions of this Act, the levy is of such amount as may be computed by the Authority under section 38." — Section 37(2)
Verify Section 37 in source document →
Ministerial oversight is evident in Section 40(3), which requires the Minister’s prior approval before additional levies can be imposed, and the publication of relevant notices in the Gazette under Section 40(4):
"Despite subsections (1) and (2), no PPF Scheme member may, without the prior approval of the Minister, be required to pay additional levy... as the Minister may, by order in the Gazette, prescribe." — Section 40(3)
Verify Section 40 in source document →
"For the purposes of subsection (3), the insured policy base or gross premium income... must be determined on such date as the Authority may notify in the Gazette." — Section 40(4)
Verify Section 40 in source document →
Similarly, Section 41(4) references Rules that may specify payment methods, which could be framed under subsidiary legislation or related regulatory instruments:
"The amount of levy or additional levy owing... must be paid in such manner as may be specified in the Rules." — Section 41(4)
Verify Section 41 in source document →
Penalties and Enforcement Mechanisms
The Act provides robust enforcement mechanisms to ensure compliance with levy obligations. Section 45(4) imposes criminal penalties for unlawful disclosure of levy information, reflecting the sensitivity of such data:
"Any person who contravenes subsection (1) or (3) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $125,000 or to imprisonment for a term not exceeding 3 years or to both." — Section 45(4)
Verify Section 45 in source document →
For non-payment of levies, Section 41(2)(a) authorises the imposition of late payment fees, while Section 41(5) confirms that unpaid levies are recoverable as debts:
"If a PPF Scheme member fails to pay the levy or additional levy... the Agency may... impose on the PPF Scheme member such late payment fee as the Agency may by Rules determine." — Section 41(2)(a)
Verify Section 41 in source document →
"Any levy, additional levy or late payment fee payable under this Act is recoverable as a debt due to the Agency by the PPF Scheme member." — Section 41(5)
Verify Section 41 in source document →
Section 41(6) further empowers the Agency to recover full indemnity costs in legal proceedings, ensuring that enforcement actions do not impose undue financial burdens on the Agency:
"Where the Agency has commenced any legal proceedings... the Agency is entitled to claim costs on a full indemnity basis from that PPF Scheme member." — Section 41(6)
Verify Section 41 in source document →
Conclusion
The levy provisions under Sections 37 to 45 of the Deposit Insurance and Policy Owners’ Protection Schemes Act 2011 establish a detailed and balanced framework that ensures the financial viability of the PPF Life Fund and PPF General Fund. By mandating levy payments, empowering the Authority to assess and adjust levy rates, providing mechanisms for additional levies, and enforcing compliance through penalties and confidentiality obligations, the Act safeguards policy owners and maintains confidence in Singapore’s insurance protection schemes.
Sections Covered in This Analysis
- Section 37: Levy Payment Obligation
- Section 38: Levy Rate Assessment
- Section 39: Levy Notification
- Section 40: Additional Levies and Ministerial Approval
- Section 41: Levy Payment and Enforcement
- Section 42: Refunds and Remissions
- Section 43: Notification of Excess Levy Payment
- Section 44: Re-computation of Levy Amounts
- Section 45: Confidentiality and Penalties
Source Documents
For the authoritative text, consult SSO.