SINGAPORE Law and Practice Contributed by: Simon Goh and Wang Ying Shuang, Rajah & Tann Singapore LLP
8. Interpreting an Insurance Contract 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence The general rules relating to the construction of con- tracts apply to insurance policies. The Singapore courts will generally adopt a “contextual approach” towards the interpretation of (insurance) contracts. The courts place great emphasis on giving due weight and consideration to the parties’ intention as ascer- tained from objective evidence when interpreting con- tracts. Extrinsic material (before and after the making of the contract) is admissible if it: • is relevant; • is reasonably available to all contracting parties; and • relates to a clear and obvious context. Crucially, ambiguity is not a prerequisite for the admis- sibility of extrinsic evidence. In addition to ascertaining the parties’ intentions and to supplement the contextual approach, the Singa- pore courts have found it appropriate to also examine the commercial purpose of an agreement to determine how certain clauses within such ought to be inter- preted, thereby adopting a holistic approach when construing contractual provisions. Other canons of contractual interpretation would simi- larly apply to all insurance contracts – eg, the pre- sumption against redundancy and superfluity, and the contra proferentem rule (which is to adopt an interpre- tation in a manner that is least favourable to the per- son who drafted or prepared that wording or phrase). 8.2 Warranties Certain contractual terms have acquired different meaning in the context of insurance law. For example, the terms “warranty” and “conditions” have different meaning/effect in insurance law, compared to general contract law. A warranty in the context of insurance law is a written term of the insurance contract where- by the insured warrants (through express wording or by operation of law) that certain statements of fact are and/or will be accurate. In the case of express warranties, the scope and extent of warranty provided
However, the MAS has indicated that it will have regard to the following element, which must be pre- sent, when deciding whether a contract is considered an insurance contract: • the insured becomes entitled to something upon the occurrence of an event for which the insurer is liable; • the event must involve some element of uncer- tainty; • the assured must have an insurable interest in the subject matter of the contract; and • the risk must be a pure risk – ie, involving the pos- sibility of loss only or at best a “no gain situation”. The determination of whether an industry loss war- ranty contract is considered an insurance contract may therefore be assessed by having regard to the above requirements. The MAS views ILS such as catastrophe bonds as a distinct and unique asset class that is subject to a separate regulatory framework. Since 2018, the regu- lator has sought to build a tailored regulatory, tax and listing ecosystem that caters to ILS issuances. Under the current regulatory framework, ILS will be issued via a Special Purpose Reinsurance Vehicle (SPRV), to allow sponsors to readily securitise reinsurance risks in Singapore. As of November 2025, Singapore has issued 29 catastrophe bonds, with eight listed on the Singapore Exchange. 7.2 Foreign ART Transactions As mentioned in 7.1 ART Transactions , the Insur- ance Act does not contain any express definition of what constitutes a (re)insurance contract. However, the MAS has indicated that it will have regard to cer- tain elements when determining whether a contract is considered an insurance contract. Therefore, whether particular ART transactions written in other jurisdic- tions are to be treated as (re)insurance contracts by the MAS will depend on the specific terms and struc- ture of each ART transaction.
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