Singapore

The expansion of the catastrophe bond market in recent times encouraged Insurance Australia Group (IAG) to sponsor its first transaction, which, according to the firm’s Executive Manager of Reinsurance Operations, Nick Hartry, complements its existing reinsurance arrangements.

The successful issuance of the AUD $75 million Orchard ILS Pte Ltd catastrophe bond, the first for sponsoring insurer Insurance Australia Group (IAG) and the first cat bond to be issued in Singapore, took only a few weeks, according to a lawyer who worked on the transaction.

Insurance Australia Group (IAG) has sponsored its first catastrophe bond and the transaction is also the first cat bond to be issued in Singapore, using the countries’ Special Purpose Reinsurance Vehicle (SPRV) regulations.

Singapore’s ambitions and efforts to become a global hub for insurance-linked securities (ILS) business in Asia is expected to “bear fruit in the near future,” according to Fitch Ratings.

Finance ministers from the Association of Southeast Asian Nations (ASEAN) group of countries are set to discuss disaster resilience and risk transfer at meetings scheduled for next week in Singapore, with the group looking to find ways to bring disaster risk financing up to speed.

We’re told that the grant program established by Singapore to attract catastrophe bond issuers to the domicile could total more than US $1.5 million per issue for cat bond transactions that qualify, providing a very attractive cost saving to any sponsors considering the domicile as a home for their insurance-linked securities (ILS).

Singapore has ramped up its focus on developing an insurance-linked securities (ILS) market, taken the radical step of offering an ILS grant that will fund 100% of the upfront costs incurred in issuing catastrophe bonds in the country and setting up a working group to explore opportunities for the country in ILS.