Published Date: 13 July 2023

"Growing a Vibrant Insurance Linked Securities Market in Asia" - Speech by Mr Lim Cheng Khai, Executive Director, Financial Markets Development Department, Monetary Authority of Singapore, at the Artemis ILS Asia Conference on 13 July 2023

Steve Evans, Editor in Chief, Artemis
Distinguished guests
Ladies and gentlemen


1. Good morning. Thank you for having me at the Artemis ILS Asia Conference.  It is good to see the event back for its fifth installation in Singapore. I am happy to be here, to reconnect with friends I’ve met in Artemis New York earlier this year, and to make new connections.

2. The diverse attendance today reflects the growing need and opportunities in the insurance linked securities market in Asia.

  • For governments and businesses, opportunities to insure against key risks that pose increasing economic losses.
  • For insurers and ILS sponsors, opportunities to manage their underwritten exposures to peak perils more effectively.
  • And for asset owners and investors, opportunities to diversify their portfolios from traditional asset classes, and sub-diversify their exposures to peak perils geographically.

Growth Prospects for ILS Markets

3. The global ILS market in 2023 is off to a good start.

  • Alternative reinsurance capital reached the US$100 billionSource: Aon mark for the first time this year, after some years of stagnation.
  • Reinsurance pricing is seeing a correction, with a hardening market and reinsurers being increasingly selective about risks they undertake.
  • Property catastrophe bond issuances in the first half of this year closed out at an all-time high of US$9.7 billionSource: Artemis.
  • As of April 2023, the average yield on catastrophe bonds was 12.7%Source: Twelve Capital. As at 19 May 2023, which is over seven times higher than they were in 2016. 
  • The ILS market has seen innovation.
    • The first cyber bondThe cyber bond (“Cainey”) was launched by Beazley in January 2023 was launched this January, followed by a second one in MayThe cyber bond (“Cainey II”) was launched by Beazley in May 2023.
    • Parametric triggers are also increasingly being used. At least four catastrophe bondsThese include Acorn Re Ltd (Series 2023-1), MetroCat Re Ltd. (Series 2023-1), Asagao VI- White Rock Insurance (SAC) Ltd and IBRD- Chile 2023 issued this year were structured with such triggers. They make for a clear, transparent and efficient mechanism for determining pay-outs – investor losses are not subject to complex claims assessment.

4. Asia’s ILS market is currently small, but has good long term growth prospects. 

  • Asia’s insurance markets are growing, riding on the back of economic growth, infrastructure and commercial development. 
    • Property insurance premiums in developing Asia are expected to grow at a CAGR of 16% until 2040. This is twice as fast as the global rate over the same periodSource: Swiss Re Sigma 4/2021, p1.
    • Seven of the top ten global non-life reinsurers have presence in Singapore. And six have designated Singapore as their Asian hub.
  • Asia also has a sizeable protection gap.
    • The region experienced close to US$1.2 trillion in economic losses from natural catastrophes (“nat-cat”) from 2013 to 2022.  However, only 13% of these losses were insuredSource: Aon. This is much lower than the global average of 37%Source: Swiss Re.
    • It will take significant reinsurance capacity to insure Asia against nat-cat exposures, beyond what traditional reinsurance can support.
  • On potential demand, the institutional and family office investor base in Asia is growing. 
    •  Asia’s asset pools are expected to grow and reach US$812b by 2030Source: Pension and Investments: Rise of family offices in Asia: friend or foe to money managers.
    • In Singapore, we have over US$4 trillion assets under management in end 2021.
    • More asset owners, including sovereign wealth funds and pension funds have set up offices in Singapore to tap regional opportunities.
  • In addition, the ILS investor base in North America and Europe are keen to diversify their exposures, to include Asian risks in their portfolios.

Data, Investor Base and Issuances

5. Focusing efforts in three areas will complement these tailwinds, and help to accelerate the growth of Asia’s ILS market.

  • First, build and collate granular, high-quality data on key perils facing Asian markets. 
  • Second, grow a savvy ILS investor base in Asia.
  • And third, support ILS issuances and structuring capabilities. 

6. Firstly, we need to decisively address data gaps on key risks in Asia. 

  • A lack of standardised, high-resolution and up-to-date data on key risks impedes risk quantification, modelling and pricing. 
  • The private sector is already seeking to address this. 
    • Insurers and risk modelling firms are developing more data and models for risks in emerging Asia.
      • For example, we now have a fully probabilistic risk model for flood risk in Southeast Asia in the market, to give sharper definition to flood perils. 
  • Nonetheless, we need a more coordinated effort to solve this data issue, involving stakeholders such as policy makers and public sector data owners.
  • Singapore is enhancing data through the work of the ASEAN Disaster Risk Financing and Insurance Phase 2 programme (ADRFI-2).
    • The Institute of Catastrophe Risk Management at the National Technological University has partnered ASEAN regulators and ministries of finance to develop a data exchange and analytics portal.
    • The portal provides high-resolution exposure and loss data to ASEAN Member States. These outputs enable policymakers to proactively plan and budget for nat-cat events, and utilise risk financing tools to mitigate the risk exposures.
  • The Global Asia Insurance Partnership, a tripartite partnership involving the insurance industry, regulators and the academia, is also looking to harness more data insights from research. It is currently analysing how economic and industrial centres in ASEAN will be impacted by climate risk to help with better projections and build better risk models. 
  • Singapore will continue to support industry initiatives to address data gaps on key risks in Asia.

7. Next, we will focus on investor education, to grow the investor base in Asia.  

  • Today, ILS is still a relatively niche asset class among Asian investors.
  • Only some pension funds, sovereign wealth funds and asset owners in the region are familiar with ILS. Some are also cautious due to the investment losses from ILS in recent years. But fundamentally, ILS remains a viable alternative asset class for portfolio diversification.

8. As a fund and wealth management centre, Singapore is well positioned to promote the growth of ILS investment products, and grow a well-informed investor base.

  • There are a number of global fund managers in Singapore, that already offer ILS investment products in their other offices. We seek to engage and partner them to bring such offerings to Singapore.
  • A growing base of high-net worth individuals and business owners have set up family offices in Singapore. They present an untapped customer segment for ILS instruments. And the industry can work together to promote awareness in this asset class. 
  • We have launched investor education events, partnering with SGX and the World Bank, and key ILS service providers to demystify ILS. 
  • We will continue to work with other like-minded partners to increase awareness of ILS as an asset class. 

9. Last but not least, we will support the establishment of structuring capabilities and ILS issuances in Singapore. 

  • Today, ILS structuring expertise is still relatively scarce in Asia.
  • There are efforts by public sector financing teams of reinsurers and brokers, and the World Bank, to support capacity building on insurance and risk financing mechanisms, including ILS.
    • Their technical assistance has been important in enabling issuances like the World Bank bond issued in 2019. It provided US$225m of financial protection against earthquakes and tropical cyclones for the Philippines.
  • We have also built a growing base of professional service providers and insurance expertise to support ILS issuances, including legal counsel, insurance managers, risk modellers, claims reviewers and loss reserve specialists in Singapore.
  • But we would like to bring in more structuring capabilities to serve the region. 
  • Through Singapore, structurers can tap into: 
    • Opportunities from the increasing interest and demand for alternative risk transfer solutions and ILS in Asia;
    • Our proximity to and time zone for Asian perils; and 
    • The ecosystem of professional service providers such as insurance managers, risk modellers, claim reviewers and loss reserve specialists here.
  • First movers will have the added advantage to ride the growth of ILS in Asia.
  • And MAS is keen to engage structurers and provide appropriate support to bring their capabilities here. 

10. MAS will also continue to support ILS issuances.

  • In 2018, we built a tailored regulatory, tax and listing infrastructure that catered to ILS issuances. 
  • We introduced the MAS ILS Grant, which defrays the costs of ILS issuance.
    • We have supported 23 catastrophe bond issuances to date, from cedants across US, Europe and Asia-Pacific. 
    • And cumulatively, Singapore has captured 44%Source: MAS database and estimates from Artemis. of Asian risks by issuance volume globally. 
    • The strong deal flow reflects growing familiarity and confidence in Singapore’s ILS regime.
    • And we are pleased to welcome the latest issuance in Singapore, Totara Re. This is New Zealand’s first catastrophe bond, which covers multi-perils for New Zealand.
  • MAS has renewed our ILS Grant scheme to support ILS issuances, with stronger focus on Asia Pacific risks.
    • We have extended the grant scheme, till end 2025.
    • The scope of the scheme has been expanded beyond catastrophe bonds, to include sidecar and collateralised reinsurance issuances.
    • The grant also supports issuances covering longevity, mortality and cyber risks.

11. Additionally, we have streamlined our ILS regulatory regime.  

  • We reduced the paid-up ordinary share capital for ILS applicants, from S$20,000 to a dollarEffective as of 12 July 2023.. This lowers the business costs to ILS sponsors, without compromising our regulatory objectives. ILS vehicles are fully funded at all times, and hence the reduction in paid-up capital would not affect any loss-absorbing function to policyholders. 
  • MAS has also reviewed the scope of application documents that have to be submitted, to ease the ILS licensing process. 

12. Looking ahead, we are exploring the introduction of corporate structures that can facilitate multiple ILS issuances using segregated cells. 

13. Through these mutually reinforcing efforts, we hope to grow a vibrant ILS ecosystem in Asia to enhance the overall resilience for the region.

14. Thank you, and I wish you all a fruitful conference ahead.