Singapore will build on positive ILS momentum: Gillian Tan, MAS

As Asia’s insurance-linked securities (ILS) market continues to expand, Singapore is eager to build on the positive momentum, anchor capabilities and enhance its offering for investors and sponsors, according to Gillian Tan, Assistant Managing Director (Development & International), Monetary Authority of Singapore (MAS).

Speaking at a recent Risk and Insurance Management Society (RIMS) and WTW Asia Pacific Risk Virtual Conference, Tan delivered a keynote speech on the need for resilience in the face of new uncertainties.

She touched on the war in Ukraine, the COVID-19 pandemic, and the need for climate action, with a view to how demand for resilience capabilities creates opportunities for the insurance and finance sector.

But while insurers and reinsurers undoubtedly have a role to play in the fight against uncertain and systemic risks, their pockets are only so deep and it’s likely going to require capital markets involvement.

This is an area where Singapore has made some fairly significant strides in recent years, notably when it comes to risk financing for physical climate risk.

“To support natural catastrophe risk financing in the region, Singapore has been stepping up efforts to support the development of innovative risk pooling solutions as well as better risk modelling and analytics capabilities,” said Tan. “We see insurance-linked securities or ILS, which support additional fund raising from the capital markets, as a key solution.”

After successfully implementing the required frameworks, and with the help of the Singapore ILS grant scheme, the first catastrophe bond was issued in the region towards the end of February, 2019. Since then, the domicile has gained traction with more than 20 transactions being launched in Singapore.

The positive momentum can be seen in the domicile’s growth since the first deal more than three years ago, with Tan explaining that, as of June 2021, Singapore’s ILS market share was 14% of the global market.

In 2020, the MAS extended its ILS grant scheme to the end of 2022, so it’s likely to continue to attract cedents to its shores at a time of robust cat bond issuance.

“Singapore will build on this momentum and anchor capabilities in ILS structuring, risk modelling, loss reserve adjustments, and fund management to better support corporate and sovereign cedants in the Asian time zone,” said Tan.

“We are also working on enhancing our regulatory, corporate, tax and bond listing regimes to support a wider range of ILS risks and instruments,” she added.

Speaking at our own Asia ILS conferences in the past, the MAS has noted the need and desire to refine and enhance its ILS infrastructure to support both innovation and growth.

Last year, the MAS proposed to reduce friction around the reporting and disclosure requirements of special purpose reinsurance vehicles. The goal is to bring down operational friction involved with domiciling a catastrophe bond or other ILS and collateralised reinsurance arrangement in the country.

So far this year, two catastrophe bonds have been issued in Singapore, the $220 million Tomoni Re 2022 transaction from Mitsui Sumitomo Insurance Co. Ltd. and Aioi Nissay Dowa Insurance Co., Ltd., which provides the pair with protection against Japanese typhoon and flood risks, and the more recent $175 million Catahoula II Re Pte. Ltd. (Series 2022-1) transaction for Louisiana Citizens.

2021 was a record-breaking year for the catastrophe bond market, and this year started strongly with a robust first-quarter, with issuance remaining brisk into Q2.