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ii) Deepening
Capacity and Attracting New Capital to Singapore
Let me move on to the
point on attracting new capital. Singapore has done well to attract
a critical mass of specialist insurers and reinsurers. They have in
turn provided expertise and fresh capacity. However, there is scope
for further growth. A significant proportion of reinsurance volumes
ceded outside domestic markets in Asia are presently not retained
within Asia. A number of factors may account for this. These include
the historical relationship that many insurers in Asia have with
London
based brokers and the more competitive terms and availability of
capacity offered for larger, complex risks; given the underwriting
expertise and more sophisticated risk management systems centralized
in the large insurance centres outside of Asia.
The other interesting
feature seen in established reinsurance centres such as London and
Bermuda is the ability to also attract fresh new capital that enters
the insurance markets. For London, much of the new insurance capital
flows into the Lloyd's market, while in Bermuda, we have seen the
establishment of start-up companies. A good number of those set up
in the 80s/90s have grown to be significant providers of global
reinsurance and retrocession capacity.
With the strong business
growth prospects in Asia and the heightened levels of risk exposures
and coverage required, I would like to encourage reinsurers in
Singapore to further build up the pool of necessary expertise with
the underwriting authority and capacity in Asia, to take on Asian
risks. An area which has seen a resurgence in Asia and the Middle
East is Islamic finance. There is a corresponding strong interest
seen in the development of life and general takaful business. As
with conventional insurance, reinsurance or retakaful will play an
important role in providing capacity to support the growth of the
emerging takaful industry.
Given the critical mass
of reinsurance activity in Singapore, we are keen to attract
retakaful players to Singapore. To date, we have 2 reinsurers, Tokio
Marine Retakaful and Scor Vie, who already provide retakaful
capacity. There is room for Singapore to grow its reinsurance
market further, both in conventional reinsurance, including life
reinsurance, as well as retakaful. Singapore will continue to
welcome reinsurers of good standing to set up operations here. In
this regard, reinsurance companies with only a short track record or
even newly established ones could be considered if they are well
capitalized with an acceptable rating and managed by experienced
insurance professionals with a track record of disciplined
underwriting and risk management. This is in line with our
objective of growing a vibrant reinsurance industry that is also
financially strong and well-managed.
iii) Strengthening
Singapore as a Captive Domicile
With the rapid growth of
Asian economies, corporations in the region are getting larger and
more sophisticated. Many of these corporations will be looking at
captives as an alternative risk transfer vehicle. Indeed, the
captive insurance industry has been growing rapidly as more
corporates focus on
risk management, and see the economic merits of keeping and self
insuring some of their risks in-house. The global growth rate has
been at 10%. In Asia, captive managers estimate the potential growth
rate to be as high as 25%. Singapore is currently the largest
captive domicile in Asia with close to 60 captives. Captive insurers
form an important component of the insurance industry, and
contribute to its depth and development. To further support the
growth of the captive insurance market, the government announced in
Budget 2006, a tax exemption on the offshore income of captive
insurers with effect from February 06. This serves to level the
playing field with major captive domiciles and we are confident that
Singapore will be as competitive in attracting Asian captives to
domicile here.
Full Text of Speech
Source:
www.mas.gov.sg News Release 17
May 2006
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Singapore's insurance and
re-insurance industry - next phase
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