Singapore seeks greater catastrophe resilience through ILS


Singapore aims to strengthen the region’s resiliency against natural catastrophes, and one of the ways it hopes to achieve this is through the use of insurance-linked securities (ILS).

Deputy prime minister and minister of finance, Heng Swee Keat, gave a keynote speech at the OMFIF Global Public Investor Launch on June 12, 2019. OMFIF is an independent forum for central banking, economic policy and public investment.

In his speech, Heng said that only 5 percent of the economic losses relating to natural catastrophes are insured in developing Asia.

“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 said.

The Monetary Authority of Singapore (MAS) is currently building Singapore’s ILS market to help address protection gaps, diversify the costs of natural catastrophe events and alleviate the fiscal burden on governments, Heng added.

In order to support its goals, MAS has set up the Natural Catastrophe Data Analytics Exchange (Nat Cat DAX) to support the structuring, modelling and securitisation of ILS transactions.

MAS has also set up an ILS grant scheme to defray the costs associated with issuing a cat bond in Singapore.

Insurance Australia Group (IAG) sponsored Singapore’s first cat bond as part of its 2019 catastrophe aggregate reinsurance cover - also representing the first such transaction by the company.

Following new that Singapore issued its first cat bond under its new regulatory regime, Bermuda:Re+ILS conducted a survey into whether Bermuda should worry about competition from emerging hubs. An overwhelming 87.2 percent of respondents answered yes.

“Bermuda will face stiff competition from other domiciles active in the space or targeting ILS, but the jurisdiction has had a sustainable and effective head-start with its existing regulatory framework, business infrastructure, experience and a track record that speaks for itself,” says Kathleen Faries, head of Bermuda at Tokio Millennium Re, and chair of ILS Bermuda.

Singapore, Heng Swee Keat, ILS, Asia Pacific, Bermuda

Bermuda Re