Singapore’s capital market focus for re/insurance development continues

The government of Singapore continues to look to the capital markets to push the boundaries in developing its insurance and reinsurance market, with an ambition to further develop the ability of the sector to tap capital market appetite for risk.

In revealing a new growth strategy for the Singapore financial services industry, the Monetary Authority of Singapore (MAS) again highlighted the use of the capital markets as a source of insurance and reinsurance risk capital.

The strategy aims to position Singapore as a leading international financial centre in Asia, with a globally connected marketplace, supportive of broader Asia’s development, and to serve Singapore’s own economy.

Of course, Singapore has been on a mission to develop an insurance-linked securities (ILS) market offering for a number of years now.

The Monetary Authority of Singapore (MAS) has developed a functioning issuance platform and regulatory regime, with numerous catastrophe bonds now having been issued out of the country.

Continuing to develop that platform to attract more ILS business and to make it more useful to regional sponsors and investors, has always been a key stated goal for the government in Singapore and its latest growth strategy suggests ILS, or insurance and reinsurance risk transfer to the capital markets will remain an area of focus.

Specifically, MAS states in the strategy that it wants to, “Catalyse insurance risk advisory and alternative risk transfer solutions for Asia, to address pandemic, climate, and cyber risks.”

While it also aims to, “Facilitate the participation of capital markets in risk financing.”

Development of the financial market in Singapore has always been key, as a major employment segment and source of revenues for the country.

As a result, continuing to build on successes, such as its ILS market and the catastrophe bond issuance seen, is another area where we can expect a continued focus from MAS over the next few years.

Another area of focus, of relevance to the ILS market, is a stated desire to grow Singapore’s position as a hub for climate risk transfer and reinsurance.

In addition, broader financial solutions to support sustainable finance and the climate transition are also seen as opportunities and areas of focus.

Singapore may be well-positioned to bring together its capital markets work in climate, sustainable financing and the transition, with climate risk transfer and the insurance-linked securities (ILS) market, as there is a clear opportunity to bridge some of these gaps to leverage investor appetite for risk to support the climate efforts of developing corners of the world, as well as for climate exposed industries in developed economies.

Lawrence Wong, Deputy Prime Minister and Minister for Finance, and Deputy Chairman of the Monetary Authority of Singapore, explained that the country cannot rest and must keep innovating.

He said the country has to, “Look at ways to seize new opportunities while staying resilient against emerging risks.”

Singapore is set to have a focus on developing new financial solutions that can crowd in private capital to support efforts like the climate transition, while natured based financing solutions are also in scope and so too are blended finance opportunities, where established expertise and infrastructures can be combined to deliver new opportunities for the country’s financial markets.

The new strategy is expected to deliver net growth in financial services jobs of between 3,000 and 4,000 each year, Deputy Prime Minister Wong explained.

Adding, “If we do this right, our financial centre will continue to stay relevant and competitive, and be a key global financial node that connects global markets, supports Asia’s development, and serves Singapore’s economy.”

It’s encouraging that within its insurance and reinsurance market, Singapore sees the transfer of risk to capital market investors as a still key area for growth, suggesting the ongoing evolution of its ILS framework and more opportunities for the global market to transact and invest in reinsurance risk there.

Artemis aims to return to Singapore for an ILS Asia 2023 conference in July 2023. We’ll bring you details as soon as a date can be confirmed and hope to see many of our good friends and contacts from Singapore in attendance.