Insurance & Risk Financing Initiatives
Insurance-Linked Securities (ILS)
Singapore has taken progressive strides towards developing the ILS market in Singapore. This includes the setting up of an alternative risk transfer work-group to advise MAS on initiatives to support the development of Singapore as an ILS hub. MAS also launched the ILS grant scheme in February 2019, which will fund up to 100% of upfront issuance costs of a ILS bond in Singapore, to catalyse the ILS market here.
Singapore launched the Natural Catastrophe Data Analytics Exchange (NatCatDAX) in 2016, to address the lack of holistic and good quality data for natural catastrophe risks in the region, which has led to a growing protection gap. This is a Public-Private Partnership, supported by the MAS, and led by the Institute for Catastrophe Risk Management (ICRM) of the Nanyang Technological University, Singapore (NTU), in collaboration with the insurance industry.
The NatCatDAX aims to be the leading natural catastrophe natural catastrophe data facility in the region, which fuses top-down economic data obtained through advanced computational techniques and remote sensing technologies with bottom-up industry data. The outcome is a high resolution, objective and widely accepted data and analytics platform which would enhance the analytics and understanding of catastrophe risks. NatCatDAX will play a key role in supporting the use of traditional reinsurance and other innovative risk transfer mechanisms to enhance disaster resilience in the region.
The founding members of the NatCatDAX include Aon Benfield, China Re, MSIG, Renaissance Re and RMS. The strategic partners are Allianz, AXA, Maipark, Munich Re, and Partner Re. The Research and Production Consortium consists of NTU-ICRM, PERILS and Sinotech. For more information on the NatCatDAX, please refer to the following links:
Launched in 2016, the Cyber Risk Management (CyRiM) Project is an MAS-industry-academia public-private-partnership led by the Nanyang Technological University’s (NTU) Insurance Risk and Financial Research Centre (IRFRC) with strong focus on Singapore and Asia, but supported by global collaborations. CyRiM is a pre-competitive research project that aims to foster an efficient cyber insurance market place through the production of cyber loss exposure databases, cyber loss frequency and severity models, catastrophic cyber scenario reports and benchmark definitions of cyber risk.
The project is overseen by a Project Oversight Board comprising representatives from MAS, the Cyber Security Agency of Singapore (CSA), NTU-IRFRC and industry founding members Aon Centre for Innovation and Analytics, Lloyd’s of London, MSIG, Scor and TransRe.For more information on the CyRiM, please refer to the following links:
Southeast Asia Disaster Risk Insurance Facility (SEADRIF)
To increase insurance cover and boost regional disaster resilience, ASEAN member states came together to develop ex-ante risk management initiatives. Supported by the World Bank and in partnership with Japan, SEADRIF is the first regional catastrophe risk facility to be established in Asia. SEADRIF provides participating countries with climate and disaster risk financing solutions. For a start, SEADRIF will focus on a regional catastrophe risk insurance pool covering flood risks in Lao PDR, Myanmar, and potentially Cambodia, to provide immediate financing in the aftermath of a natural disaster. There is potential to expand to other ASEAN countries, other perils, and other disaster risk financing instruments such as insurance-linked securities.
SEADRIF will be set up as a trust to own a general insurance company in Singapore. As the host for SEADRIF, Singapore provides financial support for the facility and will bring together public and private sector to provide technical capacity building, reinsurance capacity, and structuring and modelling support.
Belt & Road Initiative Insurance Consortium
China’s Belt & Road Initiative (BRI) is the most ambitious development project of its kind to-date. The BRI seeks to connect Asia with the European and African continents through greater connectivity and networks with the aim of improving regional integration, increasing trade and stimulating economic growth on a trans-continental scale. Vital public infrastructure, such as roads and railways, gas pipelines, power plants and ports will be built in over 60 countries, with total estimated infrastructure investment to exceed USD 1 trillion.
However, modern risks such as geopolitical, legal, credit and environmental risks can occur along the Belt & Road. Political instability, rioting, terrorism and conflicts, and unfamiliarity with domestic legal frameworks and regulations can lead to contractual issues and huge financial losses. Non-payment risks can be exacerbated by emerging markets’ vulnerability to external shocks, such as currency and commodity price volatility.
MAS co-created the BRI Insurance Consortium with the industry to provide top-up capacity and specialised insurance coverage for BRI projects in APAC ex-China. The Singapore branch of China Reinsurance Group (China Re) is the administrator of the Consortium, which brings together Singapore-based insurers, reinsurers, and brokers who will contribute insurance capacity, and provide risk management services.
The BRI Insurance Consortium will initially focus on key lines of business that play to the specialty risk strengths of Singapore’s insurance markets, with a view to ultimately be a one-stop solution for both property & casualty (P&C) insurance, and other specialty insurance.
Global Asia Insurance Partnership
The Global-Asia Insurance Partnership (GAIP) will be established to address future development and needs of the insurance sector. GAIP will be a tripartite partnership between the industry, MAS and academia, and has three pillars of activities: (i) Living Lab to produce risk exposure databases, risk models and risk scenarios, setting the foundation for insurers to create innovative insurance solutions to address key risks confronting the region such as longevity and health which need new approaches, technology and data, in addition to new and emerging risks such as environmental liability and climate change risk and Industry 4.0 risks; (ii) policy think-tank to bring about robust policymaking through the provision of research, analysis, and discussion platforms that enhances awareness amongst regulators and policymakers of relevant risks in Asia, and possible risk mitigation and transfer solutions; and (iii) talent development to grow a pipeline of skilled insurance talent with skills across the entire career pathway to meet the demands of the region’s growing insurance markets.