ILS can unlock capacity for Asia’s sizeable protection gaps: Ravi Menon, MAS

Speaking at the 19th Singapore International Reinsurance Conference yesterday, Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS), explained that insurance-linked securities (ILS) are a critical tool that can unlock capacity for the sizeable protection gaps that exist in Asia.

Menon, the chief of the Singapore central bank and integrated financial regulator, explained that the role of alternative risk transfer structures is important for mobilising capacity that can respond to the protection gap needs of Asian risk bearers.

He explained that, “Insurance-linked securities (ILS) help unlock additional risk financing capacity from capital markets and private investors,” and can be “particularly effective in providing much needed cover for peak risks.”

He highlighted the catastrophe bond market, recognising that it is “seeing good innovation”, citing its expansion into lines of business such as cyber risk, with a number of cyber catastrophe bonds now issued and more in the pipeline.

Menon also noted efforts in the ILS market to embrace ESG transparency, with initiatives looking to address this issue, to “improve ESG related data and disclosure across ILS transactions.”

He went on to highlight the extension and expansion of the insurance-linked securities (ILS) grant scheme in Singapore, which now covers collateralised reinsurance and sidecar issuances and can be used for support to non-property risks such as longevity, mortality, and cyber risks.

At the same time, Menon noted that the ILS regulatory regime in Singapore has been streamlined to “make it more cost efficient.”

He also noted the ongoing exploratory work to develop a protected cell vehicle that can allow for multiple ILS or collateralised reinsurance transactions within a single corporate structure, something that has been discussed for a number of years now as an important future evolution for the Singapore ILS regulatory regime.

On top of this, Singapore is engaging with both the ILS industry and the private wealth sector to deliver investor education sessions, as MAS aims to “grow a well-informed ILS investor base,” Menon said.

“There is a good opportunity for Asian investors, especially the growing private wealth and family office segments, to invest in ILS as part of a diversified portfolio,” he explained.

Concluding that this is particularly attractive right now as, “The risk terms and pricing in the global ILS market have improved for investors lately, especially in the catastrophe bond segment.”

Watch two videos from our ILS Asia 2023 conference in Singapore held in July this year, to learn more about its ILS marketplace:

– Keynote: Monetary Authority of Singapore (MAS).

– ILS developments in Singapore panel.