As Singapore continues to strive to become Asia’s global capital for re/insurance and risk transfer, Minister and Deputy Chairman of the Monetary Authority of Singapore (MAS), Lim Hng Kiang, has announced a new infrastructure consortium for initiatives under China’s One Belt One Road (OBOR) project, as well as further steps to develop the region’s insurance-linked securities (ILS) market.
The MAS announced recently that it had published a road map for the future of its financial services sectors, which included insurance and risk transfer, and outlined Singapore’s goal of becoming Asia’s risk transfer hub.
And now, speaking at the 14th Singapore International Reinsurance Conference, Minister for Trade and Industry and Deputy Chairman of MAS, Kiang, discussed Singapore’s global insurance and risk transfer ambitions, announcing some new initiatives designed to support the market’s metamorphosis.
One such initiative concerns public-private sector partnerships, which, in other parts of the world have helped to increase both insurance penetration and resilience against natural catastrophes and other exposures.
“Continued industrialisation, expanding cross-border trade, and infrastructure development are at the heart of Asia’s growth. These create vast investment opportunities in the region, and will also drive demand for insurance solutions to mitigate a variety of business risks,” said Kiang.
Kiang announced the formation of a Singapore-based infrastructure consortium for OBOR projects, which will be administered by China Re Singapore, and is designed to offer top-up capacity and specialist insurance protection for OBOR projects in the Asia-Pacific, excluding China.
The consortium brings together the knowledge, experience, and skills of Singapore domiciled insurers, reinsurers and brokers, that will provide capacity and risk management services for OBOR projects.
OBOR aims to connect China and countries throughout Asia, the Middle East and also Europe through a series of land and sea trade routes, which is expected to require infrastructure investment of more than $1 trillion.
However, a broad set of challenges exists, including environmental risks, legal challenges, and issues around terrorism and political volatility, and also differing legal and regulatory frameworks present another problem for the successfulness of the OBOR initiative.
“The MAS is thus seeking to co-create new risk solutions with regional governments and the industry, and utilise these solutions on a pre-emptive basis to help governments and investors safeguard against key risks like natural catastrophes, construction risks and political risks,” said Kiang.
Initially, the consortium will focus on lines of business that benefit the specialty risk strengths of the region’s markets, and will be piloted with two lines of business, being Construction, and Project Cargo & Liability.
“We have established a group of interested lead and follow markets in Singapore to offer coverage in these two lines. The markets comprise leading insurers, reinsurers and Lloyd’s syndicates operating in Singapore. We look forward to the industry’s active participation in this bold venture, continued Kiang.
As well as the formation of the OBOR consortium, Kiang also revealed that MAS has taken additional steps to improve Singapore’s alternative risk transfer capabilities, with the offering of an ILS grant that will fund 100% of the upfront costs incurred in issuing catastrophe bonds in the country. Furthermore, Kiang announced the formation of a working group to explore opportunities for the country in ILS.
“The two strategies of ILS and public-private partnerships that I have highlighted earlier mark the metamorphosis of Singapore’s reinsurance industry as we transform from a mainstream traditional reinsurance hub, to a sophisticated full-fledged global capital for Asian risk transfer,” said Kiang.
