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Asia-Pacific will deliver strong growth for insurers who must lead charge on climate and cyber

Singapore will do its part to fuel growth, including support for ILS, Minister Wong tells the 17th SIRC.


The global insurance industry can step up business in Asia to close a hefty gap in P&C penetration and address rising threats from climate and cyber risks, Singapore’s Minister for Finance and deputy chairman of the Monetary Authority of Singapore (MAS) Lawrence Wong told delegates in opening remarks to the Singapore International Reinsurance Conference (SIRC).

Singapore will do its part to fuel growth, including support for insurance-linked securities (ILS) in the alternative financing area.

“As Asia grows, more lives, wealth and assets will need protection,” Wong told the online event. Asia is poised for a wave of insurance growth as the continent “continues to lead globally in terms of economic growth, the rise of the middle class, wealth creation and urbanisation.”

Wong reported Asian insurance market growth at nearly twice the rate of growth globally and cited an Allianz study suggesting 8 percent average annual growth to 2030.

With Asia leading global economic growth and already suffering property and casualty coverage levels which are “disproportionate to the level of assets at risk,” the required increase in penetration rates throughout Asia “will take time.”

Insurers are especially invited to lead the way in addressing new “existential” risks stemming from climate change and cyber, in addition putting solutions into place for the types of fragilities exposed by the COVID-19 pandemic.

“The required increase in penetration rates throughout Asia will take time.”
Lawrence Wong, Singapore Minister for Finance

“The future of climate change will be won or lost in Asia,” Wong told delegates, citing heightened exposure to weather-induced natural catastrophes versus other global regions and a rising contribution to global emissions of greenhouse gases.

Some 27 percent of Asian gross domestic product “could potentially be threatened by climate risk before 2050,” he claimed, citing industry research.

Insurers should throw their weight as investors towards de-risking and resilience strategies, push the companies they invest in towards low-carbon sustainability and partner with local authorities for a “pooling of expertise, financing, data and talent”.

Wong praised the MAS Global-Asia Insurance Partnership between insurers, regulators and academia as a model for developing actionable insights, policy recommendations and solutions.

Digitisation and big data will be the key ingredient to such relationship, Wong argued, enabling the industry’s role in “not only risk transfer, but also risk prevention” and creating the basis for deeper collaboration with policymakers and academia.

The era of digitisation is bringing challenges for the insurance sector and Wong identified cyber threats as the second major area after climate where insurers will need to step up their game. Singapore leads in supporting insurtechs to aid in that process, he claimed.

“Asia is vulnerable,” Wong said, citing one quarter of global cyber attacks in 2021 to date. “The costs of cyber breaches are staggering.”

“Insurers can work closely with the cybersecurity industry and policymakers to better assess and quantify cyber risk.”

The task stretches well beyond paying claims to victims of cyber crime and further into prevention than many traditional areas of insurance.

“Insurers can work closely with the cybersecurity industry and policymakers to better assess and quantify cyber risk and to formulate risk insights,” Wong said. The small and medium-sized enterprise sector deserves better coverage and industry as a whole may require more affordable premiums, he said.

To finance growth opportunities in the region, Wong supports ILS markets and government risks polls.

“Such options can ensure better protection that better matches the scale of coverage needed,” he told delegates via the virtual platform.

“Singapore will do our part to support the development of ILS in Asia-Pacific, through a sound regulatory and legal regime and a growing base and expertise of ILS service providers”—including via a recently introduced grant scheme to reduce issuance costs, Wong vowed. Issuance in Singapore over the past three years has already included 18 ILS deals, he noted.

Government risk pools of use in helping the Asia-Pacific region face risks include the Southeast Asia Disaster Risk Insurance Facility, Wong said.

In tandem with Japan’s Finance Ministry and the World Bank, the project is offering resilience solutions for the Association of Southeast Asian Nations member states and has already put a flood insurance pool in place for Laos as of February 2021.


Main image: shutterstock.com / BorisVetshev