Published Date: 27 March 2007

Keynote Address by Mr Ong Chong Tee, Deputy Managing Director, Monetary Authority of Singapore, at "Insurance Leaders Forum", Raffles City Convention Centre on 27 March 2007

Mr Anthony Lim, President of Singapore Insurance Brokers' Association
and new Chairman of World Federation of Insurance Intermediaries
Mr Bruce Basso, Immediate Past Chairman of World Federation of Insurance Intermediaries
Distinguished Guests,
Ladies and Gentlemen,


1   Good morning. Let me first welcome all visitors to Singapore. I understand that this is the first time the World Federation of Insurance Intermediaries (WFII) is holding its Board Meeting in Asia. We are certainly delighted that you have chosen to hold your Annual Council Meeting in Singapore, and to organize this Insurance Leaders Forum with the Singapore Insurance Brokers Association.


2   This year is of course, "ten years after", from the financial crisis that hit Asia.  There have been a lot of developments since, when one considers how much the regional economic landscape has changed.  Asian economies are today, much more confident in growth prospects, fueled by emerging giants of China and India, and also the renewed growth in Japan and a vibrant South East Asia region.   By many projections, Asia will continue its growth momentum to remain one of the fastest growing regions in the world.  Estimates are for Asia's share of world GDP to grow from 35% in 2005 to closer to 45% by 2020.


3   With the stronger economic performances, it is not surprising to see the accompanying growth in the insurance industry in this part of the world.  Indeed, insurance premiums (both life and non-life) have been growing faster than corresponding GDP growth in most emerging Asian countries.

4   For example, over the 1999-2004 period, premiums grew at double-digit average annual rates in South East Asia. Vietnam at 44%, Indonesia 13% and Thailand 14% just to cite some figures. Although these are from a relatively low base, the potential size of these markets are immense.

5   As a percentage of global premiums, we are seeing a rise in Asia's share; in 2005, Asian premium accounted for 25% of global premium volume.  If we look at the emerging markets' premium volume growth, South East Asia notably contributed around 73% of the emerging market's share increment in 2005 [1] .


6   What has fueled the strong growth in Asian insurance markets? I can offer a few observations:

i) Many Asian countries have developed their export sectors which have been engines of Asia's economic growth. Intra-Asian trade, has grown to more than 50% of the region's total trade in 2005. This coupled with strong Asian versus rest-of-the-world trade flows have meant Asian trade rising to unprecedented levels, generating heightened demand for insurance in trade credit, marine & cargo, etc.

ii) The rapid pace of property and other infrastructure developments in Asia have also created greater demand for protection against destruction by fire and other catastrophes, terrorism, and even financial and political risk protection for intermediaries and investors.  This ability to raise and deploy capital for infrastructure projects, together with the protection of property and to manage the ensuing risks will continue to be important in spurring insurance activities.

iii) In addition, regional expansion and globalization of many Asian companies have created a growing demand for insurance for more complex risks accompanying a larger regional or global footprint. This is supported by a greater level of risk awareness and the importance placed on enterprise risk management now compared to say 5 to 10 years ago. Enterprise Risk Management, or commonly called ERM, is more widely practiced in Asia. Many companies have begun to view risks across the enterprise in a more holistic and integrated manner, and adopt more sophisticated measures to manage them.  In Singapore for instance, a KPMG survey shows that 35% of companies and organisations now have a comprehensive ERM programme, almost nine times the 4% in 2002 [2].

iv)  Asia's economic expansion has resulted in rapid wealth creation.  There is a rising affluent middle class and this greater affluence has spun off opportunities for greater demand in  financial services including personal and high net worth insurance.

7   The evolution of the risk landscape amidst the regional opportunities have also presented challenges for insurance companies in Asia.  Insurers themselves have had to improve on their own risk management processes when taking on larger, more complex risks or confronted with newer forms of risks.  Examples include a growing frequency of natural catastrophes and new pandemic risks.  Insurers also have to adjust to changes in regulatory environment based on risk based methodologies, and cope with more demanding shareholder expectations.  In a recent survey by Deloitte Financial Services, managing risk is not surprisingly voted the top issue on the insurance watchlist.

8   What do all these developments mean for insurance intermediaries? International insurance brokers, as you all know, have transformed and adapted to match the changing needs and demands of their corporate and insurance clients.  From being a mere match maker of the needs of clients with suppliers of insurance and reinsurance, brokers are now increasingly providing a greater range of higher value added services. This evolution is in tandem with the changing risk landscape that I alluded to earlier. 

9   The consolidations that have taken place in the international broking industry have enabled the much larger outfits to channel and commit resources into offering more sophisticated services. Today,  brokers play leading roles in the provision of a wide range of risk management related services. These cover advice on dynamic financial analysis to portfolio and financial modeling, catastrophe modeling, insurance securitization, alternative risk transfer and management, and even merger and acquisition advice.


10   The rapid economic developments in Asia, de-regulation, more complex risk environments and the greater focus and emphasis on risk management will bode well for growth in insurance and insurance broking activities.  While traditional broking services will continue to grow, so too will the range of new services.
11   The Singapore financial centre is an important insurance and reinsurance hub for the region.  For example, we have attracted a critical mass of 27 international reinsurers in Singapore, including many amongst the top 25 reinsurers globally.

12   There is a growing pool of specialist players including the top specialist trade credit insurers, the P&I Clubs and Lloyd's Asia. Lloyd's Asia, for instance, has replicated its market structure here in Singapore, as in London.  Today, 8 Lloyd's syndicates operate in the Lloyd's Asia market underwriting businesses from across Asia.  Together, these players are contributing to the build-up of capacity and in underwriting expertise within the Asian time zone.

13   The insurance and reinsurance broker community in Singapore has also grown significantly. Currently, we have a total of 63 brokers, including more than half of the top 10 international brokers that already have a presence here.  The brokers play an important role in advising and serving the interest of their Asian corporate clients and insurance companies, and have contributed to the economic success in Asia by facilitating risk management and securing good insurance programmes for businesses.

14   I am told that insurance brokers are building up their risk and consultancy services to support the growing and more sophisticated client base. One such service that some brokers in Singapore already provide, is alternative risk transfer or ART. Many corporations are already considering captives as an ART vehicle. Singapore is today, a leading captive insurance domicile in Asia. Captive insurance has experienced average premium growth of over 21% over the last 5 years, and we have almost 60 captive insurers presently. The concept of captive insurance will likely grow in Asia as corporates become more sophisticated risk managers. This is also supported by Aon's recent report on Global 500 companies, which shows that Asian markets offer the biggest growth potential as only 27% of the Asian Global 500 companies have a captive.

15   Some brokers are also expanding beyond ART advice to areas like insurance securitization. The concept is still relatively unfamiliar amongst Asian players. But I believe that insurance securitisation can play a larger role in providing an alternative to traditional markets in diversifying large risks and exposures.  There was a recent Group of Thirty Report that noted the securitization of insurance risks through capital markets will offer opportunities to meet the growing demand for reinsurance by supplementing capacity.

16   On our part, the MAS recognizes that there will be specialized areas of growth that will require new skills and human capital. We are committed to developing and upskilling the talent pool within the industry, together with industry partners. As an example, we have put in place a Financial Training Scheme to co-fund the training and development of insurance, including specialized insurance skills. The Institute of Banking and Finance is also leading an effort to raise competencies across the financial sector, and this include working with insurance practitioners on a set of competencies for different job levels of an insurance professional. More broadly, I would encourage the industry to consider how to profile the job opportunities in the industry to draw in fresh talent locally and abroad.

17   In addition, the development of more advanced risk management techniques and tools can be supported by specialized research.  It is worthwhile for the industry to also deepen its ties with academia in Singapore, and identify relevant areas where a research collaboration can make a difference.  MAS will also be happy to facilitate such tie-ups.


18   To conclude, I am sure this Forum will not only provide a good occasion to network, but also in facilitating a fruitful discussion and exchange of views on pertinent issues to the insurance and broking industry. I am sure many of you in this room enjoy what you do, and as Aristotle once said, "Pleasure in the job puts perfection in the work". On a final note, allow me to once again congratulate Mr Anthony Lim as the new Chairman of WFII.

1  Swiss Re Sigma Report: No. 5/2006
2  "Singapore: ERM Implementation Leaps Almost Nine-Fold in Four Years", Asia Insurance Review, January 2007