Contracts of insurance are not included within the list of "scheduled contracts" which will benefit from the temporary relief measures under the terms of the Act.
This means that the Act will not relieve either insurers or insureds of their respective contractual obligations under a policy of insurance (for instance, the requirement for an insured to pay premium to its insurer). Any questions relating to a party's obligations arising under a contract of insurance will therefore continue to be determined in accordance with the policy wording, and applicable insurance law.
The Act may nonetheless potentially impact (re)insurers depending on the classes and types of business being underwritten, if the subject matter being insured falls within the scope of the Act. For example:
Trade Credit / Contract Frustration / Non-Payment insurance
- Where cover is given to banks/finance companies in respect of loans issued to qualifying "enterprises", those banks/finance companies may now be required to extend payment relief to their borrowers and/or may be prevented from taking legal action to recover payment for the prescribed period.
- Where cover is given in respect of the payment for goods sold (being plant, machinery or fixed assets in Singapore) used for business purposes, suppliers may now be prevented from taking legal action to collect payment for such goods or enforce retention of title.
- Where cover is given in respect of the performance of construction or supply contracts, the timelines for performance may be extended.
- Insurers may be asked to consent to rescheduling of due dates / performance dates, or the extension of policy periods.
- Insurers will also want to ensure that insureds maintain dialogue with their counterparties during this period and stay aware of developments with respect to the relief measures and applicable time frames so that they are in a position to take prompt action to collect/enforce security/require performance when permitted to do so.
Insurance of Performance Bonds
- Where cover is given for performance bonds issued in connection with construction or supply contracts, the term of such bonds may be extended and insurers may be asked to agree to a similar extension to the policy period.
- Where a performance bond is called in notwithstanding the restrictions on doing so, the Act will void the call of the bond.
Event cancellation insurance
- Certain contracts for the supply of goods and services are included within the Act, including "event" and "tourism-related" contracts. Any increased costs or expenses relating to a party's inability to perform such contracts will need to be considered before determining if they fall to be indemnified under an event cancellation policy. Also, the scope of what is a "tourism-related" contract might need careful consideration.
Property Insurance
- The Act relieves contractors from liability for non-performance (if caused by Covid-19). This might result in longer periods of time being afforded to contractors to complete a project, reinstate pre-existing damage or undertake mitigation activities. This in turn could increase the costs of reinstatement (relevant for property insurance), delay the commencement of commercial operations (relevant for Delay In Start-Up insurance) or prolong business interruption periods if the business is already in operation at the date of loss (relevant to business interruption insurance).
Financial Lines
- The relief provided in both the temporary changes to insolvency laws and for the conduct of meetings is likely to provide some relief to D&O insurers, as it will provide directors with much needed flexibility from MAS requirements and potentially avoid prosecution.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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