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SINGAPORE : Tax incentives for insurance broking income announced at last Friday's Budget may help to speed up the growth of general insurance premiums in Singapore, said tax experts.
They said premiums grew at an average of 5 percent in the last 4 years, down sharply from the strong 22 percent pace seen between 1998 and 2002.
The unprecedented economic growth in Asia in recent years means more infrastructure, more factories, more ships, or in short, more assets. And with that, a growing need for insurance.
Yip Yoke Har, Corporate Tax Partner, PricewaterhouseCoopers, said: "All these economic activity then means there is a need for asset protection and a need for insurance coverage. All these, of course, then leads to a major growth, quite an explosive growth in the need for insurance coverage and thereby insurance premiums.
"So there is a big growth in Asian premiums out there, and what Singapore wants is to have a fair share of that pie of offshore premiums."
Currently, insurers and reinsurers already enjoy concessionary tax rates of 10 percent or less in Singapore. But the latest incentive extends the concession to brokers who advise the insured and seal the deal for insurers.
Ms Yip said: "It's also a further incentive for the brokers to bring more into Singapore. There's really nothing to stop a broker, and most of these brokers are actually part of an international chain, international group.
"There's nothing to stop them rather than bringing the business into Singapore, to put it to London or Bermuda. But if I put it to Singapore and if Singapore gives me a good tax rate on my activities, then I can perhaps increase the level of activity that I do in Singapore."
Tax advisors say big names like Lloyds' of London, Marsh, Aon and Gallagher already have a presence in the Republic. But the concessionary tax rate may encourage them to expand and bring in more brokers.
PricewaterhouseCoopers believes the government is also hoping that brokers will offer new services - such as setting up captive vehicles, insurance securitisation and enterprise risk management.
Market watchers say this latest incentive is just a part of the larger goal of developing Singapore into a financial hub.
Industry experts expect growth of insurance premiums within Asia to outpace GDP growth, and a share of this untapped market is what Singapore hopes to bring onshore. - CNA/ch
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