Reinsurance to support Asia’s climate, energy, digital, and demographic transition: MAS chairman
November 4 2024 by InsuranceAsia News
At the 20th Singapore International Reinsurance Conference (SIRC), Gan Kim Yong, deputy prime minister and minister for trade and industry, and chairman of the Monetary Authority of Singapore (MAS), delivered a keynote address highlighting the pivotal role of reinsurance in driving sustainable development across Asia. The conference, which has grown into a leading forum for the global reinsurance industry, saw a strong turnout of about 3,300 delegates from over 65 countries, reflecting the strength of Singapore’s insurance industry.
The minister began by noting the impressive growth of Singapore’s insurance sector, with general insurance gross premiums reaching SG$13.5 billion in 2023, a 7.5% year-on-year increase. Reinsurance premiums also saw significant growth, rising 31% year-on-year to SG$27.6 billion, accounting for about 21% of Asia’s reinsurance market. This growth is underpinned by a resilient global reinsurance industry, which has seen capital increase by 3.7% since the end of 2023, reaching a new high of US$695 billion in the first half of 2024.
Gan outlined Singapore’s commitment to reinforcing its position as Asia’s leading reinsurance hub. He emphasised the importance of developing a marketplace of insurers and reinsurers, deepening capabilities in AI, and expanding insurance capacity through alternative risk transfer instruments such as sovereign insurance solutions and insurance-linked securities (ILS).
“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,” Gan said.
The minister emphasised that the reinsurance industry is well-positioned to support Asia’s growth as it navigates four key transitions: climate, energy, digital, and demographic.
Climate and energy transition
The climate transition is a critical area where the reinsurance industry can make a significant impact. Gan highlighted the increasing pace of climate change and its implications for risk projections. He noted that annual insured losses from nat cats have risen to an average of US$106 billion over the past five years, with future models indicating potential losses of US$151 billion or higher annually.
“Asia is particularly vulnerable to the effects of climate change. Total economic losses in the Asia-Pacific region for 2023 amounted to US$65 billion, of which 91% was not insured. This compares with a 30% protection gap in the United States,” Gan said.
Gan stressed the urgent need for the insurance industry to address this protection gap by enhancing risk models, scenario analysis, and data on the physical impacts of climate change. He encouraged the industry to leverage Singapore’s growing applied climate risk research ecosystem to improve risk assessments and offer tailored insurance products.
“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.” Gan Kim Yong, Monetary Authority of Singapore (MAS)
Energy transition is another area where reinsurance can play a crucial role. Asia’s reliance on fossil fuels and its rising energy needs make it imperative to catalyse investments in renewable energy. Gan pointed out that investments in renewable energy generation in Asia Pacific are expected to double to US$1.3 trillion by 2030. He called on specialty insurers and reinsurers to develop risk financing and insurance solutions for renewable energy and decarbonisation technologies.
Gan also highlighted the potential of parametric insurance covers and pre-Final Investment Decision (pre-FID) insurance solutions to address specific coverage needs. He noted that MAS is studying ways to support the growth of parametric insurance and encouraged the industry to innovate and pilot solutions offering protection during critical early stages of project development.
Digital transition
The digital economy in the Asia-Pacific region is expected to reach US$2 trillion by 2030, driven by e-commerce, fintech innovations, and AI and cloud services. With this growth comes increased risks associated with cyber threats.
“The Asia-Pacific cyber insurance market is estimated to double from 2023 to 2027, as companies seek coverage for data breaches, ransomware attacks, and other cyber threats,” Gan said.
Demographic transition
Changing demographics in Asia, including ageing populations, urbanisation, and increasing wealth, will drive demand for life and health reinsurance. Gan highlighted that many countries in Asia are experiencing rapidly ageing populations, which will increase demand for long-term healthcare, pensions, and financial products.
“Many countries in Asia, such as China, Japan and South Korea, are experiencing rapidly ageing populations. Singapore is no exception – we project to attain ‘super-aged’ status by 2026, with about one fifth of our population aged 65 years or older,” the minister said.
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