Singapore’s initiative to develop a market for insurance-linked securities (ILS) such as catastrophe bonds within the country is seen as part of a wider goal to help build resiliency against natural catastrophes in Asia, according to the country’s Deputy Prime Minister.
Speaking in Singapore yesterday, Mr Heng Swee Keat, Deputy Prime Minister and Minister for Finance, explained that access to capacity, in the form of insurance and reinsurance capital, is a key elements of its goal to contribute to sustainable growth in Asia by helping to strengthen the region’s resiliency against natural catastrophes.
Natural catastrophes in Asia have increased in intensity and frequency due to climate change, Mr Heng Swee Keat explained and at this time only around 5% of the economic impacts are actually covered by insurance and reinsurance capital.
“This puts tremendous strain on governments of developing nations in the event of a natural catastrophe, which can set back economic progress in the affected areas for years to come,” he explained.
He went on to discuss the efforts of the Monetary Authority of Singapore (MAS) in developing the insurance-linked securities (ILS) regulations for the country with the help of industry and in promoting Singapore as a hub for ILS, highlighting the role ILS has in the important job of building resiliency.
He said, “The MAS is currently developing the market for insurance-linked securities (ILS) as an alternative risk financing solution, to address protection gaps, diversify the costs of natural catastrophe events and alleviate the fiscal burden on governments.”
In addition, Singapore has established the Natural Catastrophe Data Analytics Exchange (Nat Cat DAX) in the country, to assist in collation of data on natural catastrophe events and losses, with benefits also seen for the burgeoning ILS market in the country.
Mr Heng Swee Keat said that the work of Nat Cat DAX can, “Support the structuring, modelling and securitization of ILS transactions through improving data quality and promoting standardisation.”
In addition he highlighted the current ILS grant offer, that looks to reduce the costs of issuing ILS and catastrophe bonds for sponsors looking to Singapore and which has helped the country to a successful start in ILS.
“The MAS has also introduced an ILS grant scheme to defray the costs associated with issuing a catastrophe bond in Singapore,” Mr Heng Swee Keat said. “The first catastrophe bond was issued out of Singapore earlier this year.”
As of June there have now been three catastrophe bond transactions issued in Singapore, a healthy beginning to its ILS market ambitions.
The first was a $75 million Orchard ILS Pte Ltd privately issued transaction sponsored by Australian insurer IAG. The second a $100 million First Coast Re II Pte. Ltd. (Series 2019-1) sponsored by Floridian insurer Security First and the first full 144A cat bond in Singapore. The third and most recent was a $40 million Manatee Re III Pte. Ltd. (Series 2019-1) cat bond for insurer Safepoint.
Singapore hopes to build on this initial ILS activity and we understand there are other’s in discussion with the regulator regarding transactions for later this year.
At the same time, Singapore is also developing protected cell company (PCC) regulations to support collateralised reinsurance activity in the country as well.
Commenting on the success seen in ILS so far Mr Heng Swee Keat said, “We hope to grow this, to better meet Asia’s needs for protection against disasters.”
The conference will begin with a keynote speech from the Monetary Authority of Singapore (MAS) and the event will also feature discussion related to the catastrophe bonds issued in Singapore so far, as well as the market prospects for the future.
We’re returning to Singapore for our fourth annual ILS market conference for the Asia region on July 11th 2019.
Please register today to secure your place at the conference. Tickets are now selling fast.