Speeches
Published Date: 26 October 2021

Keynote Address and Official Opening by Mr Marcus Lim, Assistant Managing Director (Banking and Insurance), Monetary Authority of Singapore, at the 4th ASEAN Insurance Summit on 26 October 2021

Building A More Resilient And Sustainable ASEAN

Good morning ladies and gentlemen, and thank you for giving me an opportunity to join you today at the ASEAN Insurance Summit. 

When we last met in 2018, the focus of the Summit was on the 4th Industrial Revolution, and how digitalisation and new technologies could impact the ASEAN insurance sector. 

Nobody could have foreseen the speed at which we have had to embrace digitalisation since then. The COVID crisis not only disrupted economies and financial markets – it also transformed the way we work and how insurers interact with their customers. 

The insurance industry has responded well to these changes. Despite the turbulence last year, the insurance market in Asia remained resilient.

  • In 2020, Asia ex-Japan registered 2.9% growth in total gross written premiums. While this was lower than the robust 6.8% growth in 2019Allianz Global Insurance Report 2020 , it was still significantly stronger than the global experience, which saw a decline of 2.1%Allianz Global Insurance Report 2021.

  • Asia’s performance benefited from strong GWP growth in China, and also from the digitalisation initiatives in the P&C business lines, which spurred new business even during periods of movement restrictions.
  • Looking ahead, the Swiss Re Institute has forecasted a global premium growth of 3.3% in 2021, largely driven by China and Emerging Asia economiesSwiss Re Institute Sigma 3/2021 – World insurance: The recovery gains pace.  

Nonetheless, the COVID crisis is a stark reminder that we live in an uncertain world. And the need to be prepared for such uncertainty is the clarion call of the insurance industry. It is therefore apt that this year’s summit is about resilience and sustainability – two themes that have come into sharp focus as the world continues to wrestle with what the new normal is going to look like. 

This morning, I would like to touch on three postures that will serve the industry well as we confront the challenges of the post-COVID world. These are:

  • Standing with policyholders;

  • Standing together; and

  • Standing for the future.

Allow me to touch on each one of them in turn.

Standing With Policyholders
In this unprecedented crisis, insurers in ASEAN and elsewhere stood with their policyholders to mitigate the risk of them losing their health or life insurance cover at the worst possible time – during a global pandemic. 

Relief measures were introduced in several jurisdictions to help customers with temporary cashflow difficulties maintain their insurance coverage. 

  • In Malaysia, insurers waived penalties for late premium payments.

  • In Thailand and Singapore, insurers extended the grace period policyholders had to pay life insurance premiums.  
Insurers also extended additional benefits to their policyholders to give them greater peace of mind. Some insurers in Brunei and Singapore automatically enrolled their policyholders with free additional COVID-19 coverage.

ASEAN insurance regulators also played our part by adjusting regulatory requirements to enable insurers to better manage the disruptions.

  • Indonesia’s Otoritas Jasa Keuangan (OJK), Bank Negara Malaysia (BNM) and Monetary Authority of Singapore (MAS) were among the regulators that extended the deadlines for regulatory submissions; and

  • the Philippines Insurance Commission introduced temporary relaxation of capital requirements.
The trust and goodwill built up between insurers and their customers during this period will serve both sides well. It is a clear demonstration of this industry’s call to manage risks over the long term. 

Standing Together

Let me move on to what it means for us to Stand Together. 

The pooling of risk is fundamental to the concept of insurance, where unpredictable individual risks become more predictable when shared across members in a pool. In this business, there is strength in numbers and the sharing of expertise and information only makes us stronger.

While ASEAN’s insurance market continues to see strong growth, there are areas where work remains to be done for us to be more resilient as a region. In this regard, catastrophe and disaster risks are in focus. Even in the midst of a pandemic, ASEAN has continued to make significant strides in this area.

One example is the Southeast Asia Disaster Resilience Insurance Facility (SEADRIF). SEADRIF launched its first product in February this year – a sovereign flood risk insurance product comprising both parametric and finite risk components. This new product will facilitate immediate liquidity financing so that funding is delivered more promptly in a disaster event. 

  • Last year, SEADRIF members established a Working Group, co-led by Japan and the Philippines to develop SEADRIF’s second risk financing solution – a Public Asset Financial Protection Programme. 

ASEAN member states also continued to make progress on the ASEAN Disaster Risk Financing and Insurance programme (ADRFI). Under the first phase of its work, ADRFI developed a historical loss database with several member states, for earthquake and typhoon events. Phase 2 of this programme will involve the development of a database that will help to aggregate the economic, insured and loss exposure data for member states. The Programme Offices will also strengthen capacity building programmes to enhance knowledge of disaster risk financing strategies and solutions. 

Stronger partnerships between the public and private sectors will also be key. 

  • The Global-Asia Insurance Partnership brings together industry, policymakers, and academia, to undertake research, and co-create innovative risk-financing solutions to strengthen Asia’s resilience against large scale risks. Platforms such as this will play an important role in helping leverage our respective strengths.

Beyond tackling specific risks, Standing Together also means deepening financial integration in the region. Increasing the cross-border supply of insurance services, and lowering the cost of insuring cross-border risks, will bolster intra-ASEAN trade. It is therefore encouraging that despite the pandemic challenges, we managed to complete the final package of the financial services commitments under the ASEAN Framework Agreement on Services last year.  

Standing for the Future
Last but not least, allow me to touch on what it means for us to Stand for the Future.

Climate change is the existential crisis of our generation. Unseasonal heavy rains leading to inland flooding, and scorching heat resulting in forest fires. The increased frequency of such climate change-induced weather events are just some reminders that we need to take this seriously. 

Climate change affects us all, and the insurance sector is not spared. In its recent Global Insurance Market ReportIAIS Global Insurance Market Report 2021 published last month, the International Association of Insurance Supervisors found that global insurers’ solvency ratios would see an absolute decrease of more than 14% under a “disorderly transition” scenario. The impact was even more severe under a “too little, too late” scenario, which would see an almost 50% absolute drop. These are just initial estimates, but clearly the impact cannot be easily brushed off.

ASEAN finance and insurance regulators must continue to steer the industry toward greater sustainability, while recognising the unique challenges that ASEAN faces. In particular, there is diversity in the level and nature of social, economic and industrial development among member states. This means that an approach suited for more developed markets cannot be applied in this region wholesale. It is not practical to expect all member states to suddenly cut their reliance on energy-intensive industries, but this should not deter us from taking steps towards achieving an orderly transition to industries that support low carbon emissions and sustainable resource management.

An important starting point to apply our minds to green finance is to establish a common vocabulary to help us focus on what matters. A credible taxonomy that reflects international standards, will strengthen confidence that ASEAN’s green and transition economic activities are compatible with global investors’ sustainability mandates. 

In March 2021, ASEAN established the ASEAN Taxonomy Board (ATB). With support from the Sustainable Finance Institute Asia, the ATB is developing an ASEAN Taxonomy that will be ASEAN’s common vocabulary for sustainable finance. It will comprise a principles-based tier that would serve as a foundation that all ASEAN member states could adopt, and the Plus standards, which would provide granular, activity-level criteria and thresholds for certain focus sectors as a start. ASEAN member states that are further along the sustainability journey can use the Plus Standard to accelerate the mobilisation of sustainable finance towards transition activities.  

Regulators have a clear role in strengthening the insurance sector’s resilience against climate-related risks. Several member states have introduced initiatives to encourage insurers to assess, monitor, mitigate and disclose environmental risk:
  • BNM has prescribed flood risk events to be included in insurers and takaful operators’ stress test exercises; and

  • the Philippines Insurance Commission has issued guidelines to encourage insurers to make green investments.

In Singapore, the MAS worked with the financial industry to co-create a set of Environmental Risk Management Guidelines that articulate our expectations for financial institutions in this area. The Guidelines apply to banks, insurers and asset managers, and go beyond climate change to cover other risks such as pollution. 

ASEAN insurance regulators have also agreed to deepen the sharing of best practices and initiatives on sustainability. We will be identifying ways to further collaborate with the ASEAN Insurance Training and Research Institute to provide capacity building training for regulators on sustainability and climate risk management.  

These initiatives are just the start of our sustainable finance journey. There is much more work to be done and much more that we have to learn. Regulators and industry will have to work closely if we are to make good progress on this front. 

Conclusion

The ASEAN insurance sector weathered the pandemic shock with great resolve. Insurers and regulators alike have turned adversity into an opportunity to accelerate their own digital transformation initiatives. I am confident that ASEAN will bear good witness to our spirit of unity and togetherness, as we continue to stand with policyholders, stand together and stand for the future.

I wish you a successful forum, and an enriching few days as we reflect on what it means to position the ASEAN insurance sector to emerge stronger and more sustainable in the post-pandemic landscape.
Thank you for your kind attention.