In a recent speech at the General Insurance Association of Singapore Annual General Meeting Luncheon, Daniel Wang, Executive Director of the Monetary Authority of Singapore (MAS) suggested that MAS will be working closely with re/insurers to promote sustainability and technological innovation in the industry.
According to Wang, MAS will encourage re/insurers to adopt more climate change measures by closely engaging them on environmental risks and mitigating actions, and will include climate-related scenarios as part of the year’s industry wide stress testing exercise.
It will also encourage insurers to adopt the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), and will anchor specialist teams to undertake sustainability strategy development, risk screenings, environmental underwriting and product development.
Additionally, MAS will partner with research institutes to better integrate long-term climate and environmental risks into risk models.
Wang noted that 2017 was the costliest year on record for weather-related disasters, with major events in every continent pushing total economic losses up to around US $344 billion, 93% above the 2000 to 2016 average.
He suggested that losses will only be exacerbated by climate change, and that managing its impacts will require “collective action by all stakeholders across the eco-system – policymakers, regulators, corporates, investors and civic organisations.”
Insurers, Wang claims, are at the forefront of environmental issues as risk carriers, risk managers, and investors, and “should comprehensively consider environmental risks and the impact of climate change in … underwriting and investment decisions.”
Wang’s speech also stressed the importance of further technological exploitation and innovation in the re/insurance industry, highlighting big data, mobile applications, telematics, and machine learning capabilities as particularly valuable opportunities.
He suggested that MAS will continue to work closely with re/insurers to transform the way it collects financial data, aiming to reduce duplication and automate data submission.
These plans will allow MAS to more efficiently process and analyse the data it has collected, and will reduce the resources and preparation time that companies need to supply data.
However, Wang also cautioned re/insurers on the potential threats that increased technological integration may entail, such as more exposure to operational, financial and reputational risks through cyber security hazards, and ethical and accountability issues related to accessing customer data.
According to Wang, MAS plans to review its Technology Risk Management Guidelines to advise re/insurers on cyber security operation, surveillance, assessment and exercises, and intends to “introduce basic cyber hygiene requirements to further strengthen the cyber resilience of financial institutions.”
In the coming weeks, the Monetary Authority also plans to offer guidance on ethical issues relating to premium rates and publicly available data, algorithm-driven decisions and pricing mechanisms in data models, and consumer transparency.
