Distinguished company,
Ladies and gents,
Introduction
1. I’m very comfortable to hitch you for this Singapore International Reinsurance Conference.
2. The theme for this yr’s convention – “Quo Vadis” or “Where are you going”, is a well timed query for all of us. Let me begin with the street forward for the world financial system, and Asia.
The Road Ahead
3. The Covid-19 pandemic has disrupted world financial exercise, upended livelihoods, and uncovered the fragilities of our world well being and social infrastructure. At the identical time, our world system continues to cope with existential challenges – together with local weather change and cyber threat.
4. Despite this, Asia’s fundamentals stay sturdy. Asia continues to steer globally when it comes to financial development, the rise of the center class, wealth creation and urbanisation. Most Asian economies are working arduous to bounce again from the pandemic. Singapore, like many different regional international locations, is studying to dwell with Covid-19, and progressively re-opening our financial system.
5. As Asia grows, extra lives, wealth and property will want safety. Asia’s insurance coverage market is rising practically twice as quick as the world market, estimated at greater than 8% of development every year till 2030.Source: Allianz Insurance Report 2020; figures are for Asia excluding Japan.
6. The insurance coverage trade can help the area’s economies in seizing alternatives in Asia in two transformative areas – local weather change and digitalisation.
Climate
7. First, on local weather. The way forward for local weather change might be gained or misplaced in Asia. Climate change poses brief and long run existential, financial and social dangers to the area. Asia accounts for greater than 50%Source: Allianz Insurance Report 2020; figures are for Asia excluding Japan. of worldwide greenhouse gasoline emissions. The area can also be disproportionately uncovered to the bodily influence of local weather change, enduring the highest catastrophe fatalities globally.Since 1970-2020, Asia Pacific has accounted for 57% of worldwide fatalities from disasters. Source: Resilience in a Riskier World: Asia-Pacific Disaster Report 2021
8. Climate change will exacerbate the frequency and depth of pure catastrophes, and widen the pure disaster safety hole. In the first half of this yr, Asia accounted for 55Source: Aon Global Catastrophe Recap 1H 2021 of the 163 pure disasters globally, leading to US$24 billionSource: Aon Global Catastrophe Recap 1H 2021 in financial losses.
9. This is critical for Asia, the place rising economies make up half of the high ten international locations most impacted by local weather threat.The Economics of Climate Change: Impacts for Asia, May 2021, Swiss Re: https://www.swissre.com/risk-knowledge/mitigating-climate-risk/economics-of-climate-change-impacts-for-asia.htmlIn truth, as much as 27% of Asia’s GDP might doubtlessly be threatened by local weather threat earlier than 2050.The Economics of Climate Change: Impacts for Asia, May 2021, Swiss Re: https://www.swissre.com/risk-knowledge/mitigating-climate-risk/economics-of-climate-change-impacts-for-asia.html
10. So, the insurance coverage trade might want to work systematically with policymakers as they reply to local weather change. Insurers can help local weather threat mitigation and adaptation measures, and reducing greenhouse gasoline emissions and transiting to a low carbon financial system.
Risk Mitigation and Adaptation Measures
11. Property and casualty insurance coverage penetration stays low in AsiaDeveloped markets similar to Europe and US accounted for 80% of worldwide property and casualty (P&C) premiums in 2018. In phrases of P&C insurance coverage penetration, developed markets accounted for US$1315 billion in premiums whereas creating APAC accounted for US$188 billion in premiums. Source: State of Property and Casualty Insurance 2020: The reinvention crucial. McKinsey and Company and is disproportionate to the stage of property at threat. Increasing penetration charges in Asia will take time.
12. The insurance coverage trade is a crucial associate in deploying various threat financing options. These might embrace authorities threat swimming pools, and insurance-linked securities, which might guarantee higher safety that higher matches the scale of protection wanted.
a. The Southeast Asia Disaster Risk Insurance Facility is an instance of a regional disaster threat facility established in Asia. Domiciled in Singapore, and in partnership with Japan’s Ministry of Finance and the World Bank, it gives local weather and catastrophe resilience options for ASEAN member states. Its first answer is a flood insurance coverage pool for Laos, which was launched in February this yr.
b. Insurance-linked securities or ILS, similar to disaster bonds, are one other rising catastrophe threat financing answer that may serve the area’s wants. These securities allow the reinsurance trade to switch and increase further financing from the capital markets, for peak catastrophe dangers.
c. Singapore will do our half to help the improvement of insurance-linked securities in Asia Pacific, by means of a sound regulatory and authorized regime, and a rising base and experience of ILS service suppliers. We have additionally launched a grant scheme to cut back issuance prices.Introduced in 2018, the ILS grant scheme (prolonged to end-2022) which covers 100% of the issuance prices (as much as SGD 2m cap) of disaster bonds in Singapore as much as SGD 2 million. The goal is to assist issuers focus on the deserves of rising this asset class whereas eradicating the near-term frictional prices of issuances in Singapore. Over the previous 3 years, 18 ILS have been issued in Singapore. These cowl a spread of pure catastrophes throughout Asia and Australia, together with typhoons, floods and storms. We have additionally supported the first Asian sovereign disaster bond masking earthquake and hurricane dangers in the (*15*), which was listed on the Singapore Exchange.
Cutting Greenhouse Gas Emissions and Transiting to A Low Carbon Economy
13. The insurance coverage trade can also be an essential associate for Asia’s economies in the transition to a low carbon financial system.
a. Insurers can present financing options to assist de-risk, and help the deployment of extra climate-friendly expertise and infrastructure options in the area. A spread of specialist insurers in Singapore together with Munich Re Syndicate, Liberty Specialty and Swiss Re present insurance coverage options for renewable vitality era services, inexperienced tools, vitality storage programs and applied sciences.
b. Importantly, insurers may also use your affect and voice as an investor, in service of the local weather transition. The insurance coverage trade has whole property underneath administration of about US$35 trillion.Source: Cambridge Institute for Sustainability Leadership 2021, ClimateSmart Research: Leadership You are in an excellent place to channel better capital flows in direction of local weather resilient and decrease carbon property.
c. In Singapore, we’ve an excellent base of funding arms of key regional and world insurers, together with AIA, AXA, Allianz and Eastspring.Eastspring is Prudential’s Asset Management Arm. These traders are stepping up their sustainable funding efforts and capabilities, by means of integrating sustainability elements into their evaluation of investments, and launching thematic sustainability funds.
Digitalisation, Technology, and Innovation
Technology and Data
14. Next, let me discuss digitalisation. Asia is quickly digitising, and Covid-19 has accelerated this development. Technology and large knowledge are reworking the idea of insurance coverage. This allows insurers to help not solely threat switch but additionally threat prevention, main to raised outcomes.
15. Through the use of superior expertise like sensors, satellites, and Internet of Things, richer and extra significant knowledge is being captured and used. Coupled with knowledge analytics, insurers are capable of develop sharper threat insights to measurement and value dangers extra precisely.
a. For instance, in the medical insurance house, expertise is enabling insurance coverage to transcend paying for medical claims post-affliction to encouraging wholesome life and habits. Many insurers, together with Singapore’s high life insurers, have begun monitoring consumer’s well being and habits by means of health gadgets and functions. The knowledge is then used to cost premium reductions for more healthy habits by the client.
b. In the motor insurance coverage house, AI and telematics gadgets are more and more getting used to evaluate and value insurance coverage, with higher pricing for safer driving habits.
Singapore’s Fintech Eco-System Supports Insurers’ Efforts
16. Despite pockets of development, many insurers are nonetheless weighed down by legacy expertise programs.
17. Nevertheless, I’m inspired to see that insurers are more and more partnering with InsurTechs in the area to help their digital, knowledge and expertise ambitions. Over the previous 5 years, practically US$4 billion has been invested in InsurTechs, and there are at least 335 InsurTechs in Asia Pacific.Source: Asia Insurance Review: Top 25 InsurTechs in Asia Revealed, June 2021
18. Singapore’s FinTech eco-system is nicely positioned to help insurers’ digital transformation. Our eco-system has grown in depth and breadth, providing a conducive surroundings for incumbents and start-ups to associate, check and develop.
a. We are residence to over 40 innovation labs by world monetary establishments, together with 10 by insurers. We even have one among the area’s largest concentrations of InsurTechs, at 80 companies. Last yr, InsurTech investments in Singapore practically quadrupled to US$95 million.Source: Singapore- Leading the Charge for Insurance Innovation In APAC, May 2021, Insurance Business Asia. Exchange charge of 1USD = 0.74SGD
b. For instance, ReMark, which is SCOR’s innovation lab, has its APAC headquarters in Singapore. ReMark is utilizing knowledge analytics and APIApplication Programming Interface (API) expertise to allow dynamic insurance coverage underwriting and efficient well being and wellness engagement. They are additionally utilizing automated speech recognition and AI to enhance productiveness and profitability for their insurance coverage companions’ distribution channels.
Cyber Risk
19. With the development of the digital financial system, cyber threat has additionally elevated. Asia is weak, and the area alone accounts for over 1 / 4 of worldwide cyber-attacks in 2021.Source: Understanding dangers inside Asia Pacific’s rising cyber insurance coverage market, Verisk June 2021: https://www.verisk.com/insurance/visualize/understanding-risks-within-asia-pacifics-growing-cyber-insurance-market/-The prices of cyber breaches are staggering. Such cyber-attacks not solely harm a agency’s expertise property, but additionally trigger monetary and reputational losses, constraining future enterprise development.
20. So cyber insurance coverage varieties part of a holistic cyber threat administration technique. Apart from managing the monetary influence of cyber incidents, many cyber insurance coverage insurance policies present entry to a panel of specialists to help with forensics, restore and restoration of IT programs, and stakeholder administration. Cyber insurers, as a part of their underwriting course of, additionally assess the shopper’s cyber safety posture and incentivise companies with stronger threat administration practices with higher protection and extra inexpensive premiums.
21. Insurers can work carefully with the cyber safety trade and policymakers, to raised assess and quantify cyber threat and to formulate threat insights consistent with evolving digital applied sciences and developments, creating extra fairly priced options with correct protection for companies. Singapore is doing our half to help efforts to develop the nascent cyber insurance coverage market.
a. Several cyber insurers in the market are customising options, combining cyber threat capability constructing, threat evaluation and financing, for SMEs, that are an under-served phase in the cyber insurance coverage market.
b. Insurers are additionally partnering policymakers in assessing their shoppers’ cyber threat. For instance, QBE Insurance Singapore, Delta Insurance, Pandamatics Underwriting, and Beazley have integrated the Data Protection TrustmarkThe Data Protection Trustmark (DPTM) was launched by the Personal Data Protection Commission In collaboration with IMDA. DPTM gives third-party validation and assures organisations that they’ve sturdy knowledge safety insurance policies in place. as a part of their cyber insurance coverage underwriting course of to evaluate whether or not their shopper has sound and accountable knowledge safety practices. Trustmark-certified organisations get pleasure from sooner utility processing and premium reductions for cyber insurance coverage.
Collaboration is Key in Developing New Solutions Together
22. Meeting Asia’s threat financing wants would require a pooling of experience, financing, knowledge and expertise from policymakers, the insurance coverage trade, and academia.
23. One platform for such collaboration is the Global-Asia Insurance Partnership or GAIP. This is a tripartite partnership between the world insurance coverage trade, regulators, and academia, supported by the Monetary Authority of Singapore. It goals to supply actionable analysis insights, develop coverage suggestions, and co-create progressive options for key structural and rising dangers that Asia faces.
We are inspired to have many trade companions contributing funding and experience to the GAIP. We have additionally been profitable in attracting expertise to the GAIP, together with Mr Yoshihiro Kawai, former Chairman of the International Association of Insurance Supervisors. The GAIP’s CEO, Mr Conor Donaldson, who’s well-known to most of you as the former Head of Implementation at the IAIS, might be sharing extra on GAIP’s work on pandemic threat, as a panellist at this convention, and we stay up for the insightful views from the panel.
Conclusion
24. To conclude, our challenges are vital however they don’t seem to be insurmountable. I’m assured that with the dedication of the insurance coverage sector, and collaboration between the public and non-public sectors, we will transfer ahead collectively – narrowing the safety hole in the area and supporting a extra resilient Asia for future generations.
On that observe, I want all of you a profitable and fruitful convention forward. Thank you.
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