MAS chairman outlines how Singapore will help reinsurance industry navigate four main transitions

Amid the growth in demand for reinsurance, driven by four major transitions - climate, energy, digital, and demographic - Singapore will reinforce its status as Asia's leading reinsurance hub through several approaches, according to Singapore deputy prime minister, minister for trade and industry and chairman of the Monetary Authority of Singapore (MAS) Gan Kim Yong.

Mr Gan said this when he delivered his keynote address, titled "Driving Asia's Growth — The Role of Reinsurance in Sustainable Development", yesterday at the 20th Singapore International Reinsurance Conference (SIRC).

The approaches Singapore will adopt to elevate its reinsurance hub status include:

1. Singapore will double down on developing a marketplace of insurers and reinsurers

Mr Gan pointed out that Singapore today serves as the Asia-Pacific hub of 12 top global insurers and reinsurers. Among reinsurers alone, 16 of the top 25 reinsurers in the world have made Singapore their regional hub, covering not just ASEAN, but also markets in North and South Asia and even Australia. Singapore also has a well-developed network of about 150 brokers.

He said that Singapore encourages insurers to expand their presence in the city state –

i. By leveraging the concentration of underwriting expertise here, including in complex property, casualty and specialty lines; and
ii. By building on the databases and models available, such as on climate change.

By strengthening the ecosystem of insurers, reinsurers and brokers, Singapore can be positioned as the hub for the development of risk financing solutions for Asia.

2. The authorities will work with insurers and reinsurers in Singapore to deepen their capabilities, in particular, in AI

There is good potential for the insurance industry to harness AI to improve productivity, customer service, and core operations including underwriting, actuarial analysis, and claims processing. For example, it is estimated that generative AI can boost the insurance industry’s revenues by 20% and cut their costs by 15%.

To support the scaling of AI with confidence, Singapore is developing a strong foundation of AI governance that balances the need for innovation with the responsible use of AI.

In this regard, MAS is working in partnership with leading insurers here under Project MindForge to develop a risk framework for the responsible use of GenAI for insurance use cases, including in AI-assisted underwriting and customer engagement.

MAS will also issue a set of good practices next year for addressing AI model, technology and cyber risks. 

In tandem, Singapore must build up its talent pool to harness the potential of AI.

MAS and the Institute of Banking and Finance have commissioned a Jobs Transformation Map study on how GenAI will change job roles in the financial sector, and to identify the new skillsets needed. The findings and recommendations of the study will be published early next year.

Mr Gan encourages the insurance industry to tap the guidance and support available to develop and deepen their AI capabilities.

3. Singapore will continue to expand insurance capacity through alternative risk transfer instruments

Mr Gan said that one such example is sovereign insurance solutions.

Singapore is part of the Southeast Asia Disaster Risk Insurance Facility (or SEA-DRIF), an ASEAN+3 initiative in partnership with the World Bank to provide climate and disaster risk insurance solutions for the region. SEADRIF has made $4.5m in payouts to support flood response in Laos, including a $3m payout in September 2024 following Typhoon Yagi.

Another example is insurance-linked securities (ILS). Singapore is supporting the development of ILS markets in Asia to unlock additional risk financing capacity for peak catastrophe risks. Of the 28 catastrophe bond issuances in Singapore over the past five years, 13 issuances have covered perils in Asia, providing $1.6bn in coverage. Whilst this is a good start, Asia currently accounts for less than 5% of the global catastrophe bond market.

With their strong credit rating, good in-country relationships, and sovereign support programmes, multilateral development banks can bring scale to ILS issuances in Asia by partnering sovereigns on programmatic issuances. For example, they can provide a ready platform from which to issue catastrophe bonds, offering faster time to market and cost savings compared to individual countries building issuance capabilities on their own.

There is also opportunity to channel some of the growing flow of investments from private wealth and institutional investors in Asia towards ILS – and to this end, MAS is partnering with the ILS industry to promote ILS as an asset class for private wealth and investment portfolios.

Such alternative risk transfer instruments can unlock additional risk financing capacity, and complement that provided by traditional insurers and reinsurers.

Mr Gan wrapped up his speech, saying, “Through strengthening our insurance ecosystem, deepening capabilities, including in AI, and developing alternative risk transfer markets in Asia, we will reinforce Singapore as Asia’s leading reinsurance hub.”

Around 3,300 delegates from over 65 countries are attending the SIRC which ends on 7 November.