Special Guest Remarks by Mr Ng Nam Sin, Executive Director, Monetary Authority of Singapore, Asean Forum on Natural Catastrophe Exposures in Asean
Dr Syamsul Maarif, Guest-of-Honour and Head of the Indonesian National Disaster Management Agency,
Mr Teddy Hailamsah, Secretary-General of the ASEAN Insurance Council,
Ladies and Gentlemen,
1 Good morning and a warm welcome to our foreign delegates who have travelled here to be with us today. Allow me to first thank the organisers for inviting me to this inaugural Forum. Before I begin, I should admit that I am not a subject expert on this topic. However, this is an area that is of much importance to countries in the Asian region.
Asia – highest catastrophes exposures yet lowest insurance coverage
2 This forum on better understanding, preparing and protecting natural catastrophe exposures in ASEAN is indeed an important issue for many reasons.
3 Swiss Re’s recent Sigma Report revealed that four out of the top five worst catastrophes in terms of number of victims in 2008 took place in Asia. By the same measure, Asia has also accounted for the top seven worst catastrophes over the period of 1970 to 2008. These statistics speak volumes and point to a strong need for effective catastrophe risk management in this region.
4 Furthermore, if we take these statistics against the backdrop of rapid economic development in Asia, it is not inconceivable to envisage a steep rise in future associated economic losses. Trends of increased urbanisation and climate change would also compound the financial impact of these events. This brings to light the importance of managing catastrophic risk exposures. One such avenue is insurance coverage.
5 However, most markets in Asia have lagged behind in terms of insurance penetration rates including in catastrophe insurance. To illustrate, the four worst catastrophes from Asia in 2008 mentioned earlier recorded total insured losses of approximately US$410 million. This is less than 0.5% penetration rate out of the estimated more than US$135 billion total damage. The ratio is in stark contrast to the 50% coverage of Hurricane Ike in the US and Caribbean region, where insured losses hit about US$20 billion with the total US$40 billion total damage.
6 To better address catastrophe risk management, there is thus a need to first appreciate the importance of assessing and characterizing these uncertainties. This would also entail measuring the long term impact of disasters on the countries. On top of these, there has to be the will to consider measures to prevent and mitigate these risks and their impact.
7 The Asian Development Bank noted recently on the need for better disaster risk management efforts in the Asia and Pacific region . There are clearly opportunities for closer collaborations amongst the regional authorities, as well as with the insurance industry. Deeper research in this area, and hand in hand, the development of talent to spearhead such research would be paramount to the success of these efforts.
Importance of building up capabilities in Asia
8 From our observation, there is still a market gap in comprehensive research and risk modeling for Asia’s natural hazards. This can be attributed to several factors such as the lack of risk awareness in Asia and other economic factors. More importantly, there is also an evident lack of reliable loss data of these events. One way to improve this is to develop more collaborative efforts between the industry, academia and relevant authorities.
9 It is thus worthwhile for the insurance industry to forge greater partnerships with the academia to leverage on their core expertise and local research network. Some of the academic and research institutes in Singapore have indeed been deepening their capabilities in this area. One of them is the newly set up Earth Observatory of Singapore (EOS). The Centre focuses on research in understanding the tectonic, volcanic and climatic processes of natural hazards in the Southeast Asian region. Nanyang Technological University (NTU) is also looking to launch major research projects relating to catastrophe risk management. These are some examples of academia contributing their competencies in enhancing understanding of catastrophe risks. The industry should tap into these knowledge as they expand their coverage for catastrophe exposures.
10 Apart from research, developing talent with relevant skill sets would also be critical for sustainable development in the area of cat risk research and modeling. I note that NTU will be introducing a course on catastrophe risk modeling in their Masters of Science for Civil Engineering programme. I would encourage more of such relevant programmes to be introduced as proactive steps to build the talent pipeline.
11 There is indeed much to accomplish. I trust that this forum would be a useful platform to deliberate and map out specific initiatives to enhance the appreciation and the proper management of catastrophe risks. I wish everyone a fruitful discussion over these two days.
12 Thank you.