More ILS structuring & deal capabilities needed in Asia as MAS streamlines regime: ILS Asia 2023

Delivering a welcome speech this morning at the Artemis ILS Asia 2023 conference in Singapore, Cheng Khai Lim, Executive Director, Financial Markets Development Department, Monetary Authority of Singapore (MAS), highlighted the need for greater structuring and deal capabilities in Asia, as Singapore continues to streamline its insurance-linked securities (ILS) regulatory regime.

Today’s conference was Artemis’ fifth ILS event in Singapore, and 180 attendees enjoyed insightful and thought provoking discussions from industry leaders and experts, with a focus on the expanding Asian ILS sector.

The day started with a welcome speech from MAS’s Cheng Khai Lim, who discussed growth prospects for ILS markets globally and in Asia, highlighting the need for significant reinsurance protection from traditional but also non-traditional sources, such as the capital markets, to better protect against steep losses from natural catastrophes in the region.

Lim also underlined the need to address data gaps on key risks in Asia, noting that a lack of “standardised, high-resolution and up-to-date data on key risks impedes risk quantification, modelling and pricing.”

One of the main messages from the speech was that MAS is committed to supporting the establishment of structuring capabilities and ILS issuance in Singapore.

While “ILS structuring expertise is still relatively scarce in Asia,” he stressed the authority’s desire to “bring in more structuring capabilities to serve the region.”

Highlighting that through Singapore, structurers can tap into “opportunities from the increasing interest and demand for alternative risk transfer solutions and ILS in Asia; our proximity to and time zone for Asian perils; and the ecosystem of professional service providers such as insurance managers, risk modellers, claim reviewers and loss reserve specialists here.”

MAS will also continue to support ILS issuance in the region, highlighted by the fact it has extended the ILS grant scheme by a further three years, to run until the end of 2025.

Interestingly, Lim also provided some insights into how MAS continues to streamline its ILS regulatory regime, which includes a reduction in paid-up ordinary share capital for ILS applicants, from S$20,000 to a dollar.

“This lowers the business costs to ILS sponsors, without compromising our regulatory objectives. ILS vehicles are fully funded at all times, and hence the reduction in paid-up capital would not affect any loss-absorbing function to policyholders,” he explained.

This was referenced in a later panel, where speakers said it was a positive move to add more cost-efficiency for sponsors wanting to set up vehicles in the region.

Lim went on to explain that MAS has also reviewed the scope of application documents that have to be submitted in order to ease the ILS licensing process.

“Looking ahead, we are exploring the introduction of corporate structures that can facilitate multiple ILS issuances using segregated cells,” he continued.

“Through these mutually reinforcing efforts, we hope to grow a vibrant ILS ecosystem in Asia to enhance the overall resilience for the region,” concluded Lim.

Thank you to all of our speakers, sponsors and attendees for their support for Artemis ILS Asia 2023. We hope you enjoyed the day, and we look forward to seeing you next year!