Yesterday Artemis held its fourth annual insurance-linked securities (ILS) conference in Singapore. ILS Asia 2019 saw 180 attendees from across the globe converge on the country, to hear insightful discussions on the state of ILS in Asia.
The key takeaway of the day for me was that education is still absolutely key to further developing the local ILS market, as well as to expanding ILS backed underwriting across the Asian region.
At the same time experience is also key. In that, by actually executing the transactions and gaining experience of the different transaction types, structures and ways reinsurance risks can be fully collateralised by third-party investors, Singapore itself and the broader Asian region can expect to see accelerating activity and deal flow.
Attendees were treated to an insightful opening keynote by Gillian Tan, Executive Director, Financial Markets Development Department at Government department the Monetary Authority of Singapore (MAS).
Tan explained Singapore’s ambitions to not just provide a home for the ILS transactions we see today, but to also innovate and encourage further expansion of the ILS market’s remit in the region and across the globe.
Tan explained the need for “continuous innovation” and Singapore’s desire to help the ILS market expand into new risks and perils, new geographies and for it to take a greater role in closing insurance and reinsurance market protection gaps.
Explaining the importance of education and raising awareness of ILS, Tan said, “We can do more as a market to educate sponsors on how ILS can contribute to a more effective risk management strategy and create more innovative structuring solutions.
“Forums like this obviously help.”
This sentiment continued throughout the event, as speakers and panellists discussed Singapore’s first catastrophe bond transactions, the potential for collateralised reinsurance activity to expand in Asia, what ILS has to offer Asian investors, and what is required for ILS to contribute to closing regional insurance protection gaps, among other topics.
As well as education, the need for real-world experience gained by transacting in ILS was also highlighted, as a way for the process to become easier, more widely accepted and easier in time.
Some of the discussions reminded me of those heard back in the late 1990’s, when catastrophe bonds were just beginning to take off and sponsors would always explain how long and difficult a process their first ILS deals had been.
That is true for Asian and regional sponsors today, as the first ILS transactions are always a difficult and long-winded process.
Mark Lamb, Chief Executive of IAG Re Singapore, part of insurer IAG, the sponsor of the first ILS transaction to be domiciled in Singapore, explained it has taken roughly 10 years for the company to issue its first catastrophe bond, from when the subject was first discussed as a possibility.
Again, that echo’s the experience of cat bond sponsors in the early days of the ILS market, reflecting the fact that securitisations of insurance and reinsurance risk remain highly complex and moving to capital market-backed reinsurance funding is still a big deal for large companies.
But it does get easier with experience, the panel discussing Singapore’s first ILS issues explained, both for the sponsors and also for the regulator and local service providers.
Hence the build-out of local and regional expertise is key for ILS activity in Singapore and wider Asia, as time zone differences and access to support for getting transactions to market remains vital.
On expanding sovereign use of ILS and catastrophe bonds in Asia, Michael Bennett, Head of Derivatives & Structured Finance at the World Bank Treasury explained during a panel on expanding risk transfer in Asia and emerging markets, that increasing awareness is vital, but that there are psychological hurdles to overcome, which can also be helped through furthering education on the opportunities and benefits of this risk transfer.
It takes time to educate sponsors and investors, but the process is accelerating in Asia and the surrounding region.
Both speakers and attendees expressed the desire to see more activity and the groundswell of opinion was that ILS activity in Asia is destined to increase and become an ever more important source of risk transfer across the region.
Thank you to all of our speakers at the conference and to the kind sponsors of ILS Asia 2019.
Tickets are now on sale for our next New York conference, ILS NYC 2020.
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