(1) The Authority shall establish and maintain in accordance with this section and regulations prescribed, a Policy Owners’ Protection Fund (referred to in this section as the Fund) for the purposes of indemnifying in whole or in part, or otherwise assisting or protecting, policy owners and others who have been or may be prejudiced in consequence of the inability of registered insurers to meet their liabilities under life policies and compulsory insurance policies issued by them.

(2) Subject to such exceptions or restrictions as may be prescribed, the Authority shall —
(a) secure that a sum equal to —
(i) the full amount of any liability of a registered insurer in liquidation in respect of a sum payable to any person entitled to the benefit under the terms of any compulsory insurance policy, being a liability arising in respect of a liability of the policy owner which is a liability subject to compulsory insurance; and
(ii) 90% of the amount of any liability of a registered insurer in liquidation towards a policy owner under the terms of any life policy which was a Singapore policy or an offshore policy and not being a contract of reinsurance,
is paid to the person or policy owner as soon as reasonably practicable after the beginning of the liquidation; and
(b) make arrangements so far as reasonably practicable for securing continuity of insurance for every policy owner of a registered insurer in liquidation or in financial difficulties who is a policy owner in respect of a life policy which was a Singapore policy or an offshore policy and not being a contract of reinsurance, and for this purpose the Authority may take measures to secure or facilitate the transfer of the life business of the insurer, or part of that business, to another registered insurer or to secure the issue by another registered insurer to the policy owners of life policies in substitution of their existing policies.

or only for vanilla life policies?

Problem is that corporate bonds require a certain minimum that most retail investors will not be able to fork out.

And the default risk is not exactly the same. In the event of a default by an insurance company, the Insurance Act provides for the setting up of a Policy Owner’s Protection Fund (”PPF”) to compensate policy owners. Under the current provisions, the PPF will cover up to 90% of an insurer’s liability on any life policy (further proration is applicable if certain limits are exceeded).

those investors could have achieved much higher returns buying bonds issued by those insurance companies.

risk is almost the same.

insurance companies go bankrupt, both bonds and the insurance plans go kaput..

arguably the insurance plans may get their money back first… but if massive kaput.. no one gets any money back!