The outlook for the reinsurance industry in Asia remains positive, Mr. Alvin Tan, Minister of State, Ministry of Trade and Industry and a board member of the Monetary Authority of Singapore, has highlighted.
In his speech at the opening of the 2022 Singapore International Reinsurance Conference on 31 October, he cited reasons for the favourable outlook. Asia continues to urbanize, the middle class is growing, and Asia is consuming and producing more. In 2025, gross written premiums for life and non-life insurance are expected to grow to S$60bn ($42.4bn) and S$20bn respectively.
Reinsurance sector in Singapore
The growth trend in Asia will benefit Singapore’s insurance industry, given the city state's role as a key reinsurance centre for the region, Mr. Tan said. Indeed, in the past five years, total reinsurance premiums more than doubled to S$20bn in 2021. Mr. Tan attributed this growth to the industry’s vote of confidence in Singapore. Since 2017, reinsurers have progressively developed their Asia-Pacific functions in Singapore to better support the region’s insurance markets and provide risk financing solutions. Reinsurers have also established strong partnerships with local and regional insurers, to produce more accurate risk assessments, support underwriting and pricing, and improve customer value propositions.
Singapore continues to be an important specialty insurance hub for Asia. Singapore has started to grow capabilities in newer lines of risk, in particular, cyber. While cyber insurance remains a nascent market in Asia as compared to Europe and North America, more insurers are establishing cyber underwriting desks and resources for Asia in Singapore.
Singapore is established as a domicile for Insurance-Linked Securities (ILS). To date, Singapore has supported 22 ILS in the form of catastrophe bond issuances, by cedants across US and Asia-Pacific.
Mr. Tan stressed that in order to support the risk transfer needs of Asia amidst heightened uncertainty worldwide, Singapore must continue to grow capabilities in Asian insurance and risk transfer, and catalyze insurance risk advisory and risk transfer solutions for the region. To this end, three key strategies are adopted:
Growing Singapore as a risk financing centre for systemic and structural risks in Asia.
Growing Singapore as a hub for alternative risk transfer solutions in Asia
Transforming insurers into digital and tech champions
Risk financing centre for systemic and structural risks in Asia
Singapore already has a good base of local and global life, health and retirement insurers and reinsurers. Singapore will continue to build on existing strengths to support the growth of new revenue streams. These include risk advisory, strategy, and consulting capabilities. Insurers are also adopting an ecosystem approach, by partnering firms from adjacent sectors, such as technology, wellness, and clinical sectors. This allows insurers to roll out more comprehensive programmes that ensure better risk outcomes. Singapore will also embed deep capabilities in newer lines of risk, including pandemic, climate and cyber risks.
The current challenges lie in a lack of established risk assessment and modelling data to support risk quantification, pricing and development of solutions. However, the Global-Asia Insurance Partnership (GAIP) aims to address these data gaps. GAIP will focus on mortality projections and morbidity implications for COVID-19 as an endemic risk in Asia, developing a pandemic risk database, and exploring COVID-19’s impact on life and retirement insurance. The insurance industry can also support the development of climate solutions in Singapore. Given the high risks from early-stage start-ups or tech for climate mitigation, insurers can support net-zero technology innovation through underwriting. In parallel, MAS is also progressively integrating environmental risk into its supervisory framework and processes, at both the individual firm and system-wide levels.
Hub for alternative risk transfer solutions in Asia The second strategy includes growing capabilities in risk pooling arrangements and in ILS, to complement capabilities in reinsurance and fund management.
Mr. Tan pointed out that Singapore has had success in facilitating the issuances of catastrophe bonds. The next aim is to allow cedants to be able to issue a broader spectrum of ILS. This includes sidecars, and collateralized reinsurance arrangements. MAS would like to work with the industry and experts to co-develop a comprehensive outcome.
Helping insurers digitalize
Singapore will continue to support insurers in ramping up digitalization, data analytics and innovation efforts.
The COVID pandemic has sped up insurers’ digital transformation plans, especially in consumer-facing aspects such as distribution channels, customer service and claims. Singapore wants to continue this momentum and encourage insurers to take their digital transformation one step further – to update their mid-and back-office operations.
Insurers can tap into Singapore’s FinTech ecosystem to support their digital transformation. Today, Singapore houses over 40 innovation labs by global institutions. Singapore also has one of the region’s largest concentrations of InsurTechs, with about 80 firms located in Singapore.