If Singapore and Hong Kong are able to establish themselves as valuable domiciles for insurance-linked securities (ILS) business, it should spur local reinsurers to develop capabilities as the investor base swells in tandem.
With the exception of Japan, the ILS sector is in its infancy from an investor stand-point across much of the Asia region, when compared with other parts of the world.
Of course, the region is home to a wide range of natural catastrophe events, which, year-after-year devastate communities, economies and livelihoods.
In places like China, where risk accumulation is on the rise alongside insurance market growth, it’s expected that the capital markets will be required as well as the balance sheets of global re/insurers.
Singapore’s ILS regime is a few years old now and thanks to the regulator’s grant scheme, which covers some of the issuance costs of catastrophe bonds, has started to gain some real momentum in 2021.
Hong Kong’s ILS regime, which was finalised earlier this year, also offers a grant scheme and hopes to serve as a diversifying hub for ILS business in Asia and beyond.
As the Asia region intensifies its efforts in ILS and Singapore and Hong Kong look to cement themselves in the minds of investors and sponsors alike, what might the region’s investor landscape, the core of which is pensions, look like in a decade from now?
“What I hope will happen, between Hong Kong and Singapore, if they manage to have that sort of hub, you’ll see maybe in Asia that reinsurers, and there’s a lot of big ones, they start to develop out that presence, or that capability and then they put it within say Hong Kong or Singapore,” said Timothy Yip, Executive Director at ILS Advisers.
According to Yip, as the two regions build out their respective ILS hubs, it could be that a lot of the Greater China reinsurers end up in Hong Kong, while Korean issuers might look to Singapore, for example.
“Hopefully,” he stressed, “that kicks it off.”
As the ILS jurisdictions develop, Yip expects to see the wider service provider community relating to the asset class grow in parallel to the local investor community and contribution.
“Just that larger presence makes a big difference, I think, and having more reach as they start to develop local relationships with new investors and people are more exposed to the asset class. And, so, I think as that talent pool develops, I think the investors will also naturally come in parallel with that,” said Yip.
Once that initial development phase occurs, continued Yip, you’ll hopefully start to see more longer-term plays.
“Similar to perhaps Bermuda, where track records start to be developed and those investor relationships are gained within the region. There’s different relationships with different cedents built up.
“And then maybe you’ll start seeing more independent ILS strategies as well coming out of Hong Kong and Singapore. Everything is there, the infrastructures is there, both in Hong Kong and Singapore.”
As well as the on-demand playback, we will be archiving every session from our online and virtual ILS Asia 2021 conference over on our YouTube Channel in the coming weeks and audio versions will also be uploaded to our podcast which you can subscribe to here.
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