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     FrontPage Edition: Sun 21 May 2006

Singapore's insurance and re-insurance industry - next phase



An Excerpt

We have a mix of many positives - a stable political situation, pro-business environment, sound regulatory framework skilled and educated workforce, excellent infrastructure and world class amenities, and a strategic geographic location with connections to all parts of Asia and Australia/New Zealand.
We have attracted many reputable international financial institutions to Singapore, including many international insurers and reinsurers to be based here.
Singapore's development as a leading insurance centre has seen a rich pool of 56 direct insurers (including Life, General and Composite), 28 professional reinsurers, and 60 captives today.
We are currently the largest domicile for captive insurers in Asia and 20 of the top 25 reinsurers globally are based in Singapore.
Most of the top brokers are already present in Singapore. Offshore insurance business in fact accounts for more than half of the total general insurance business written out of Singapore.
Leveraging on this critical mass of players and activities, Singapore 's well positioned to progress into the next phase of development as Asia's leading insurance and reinsurance hub. There are several areas that we are focused on. These include:
i) Deepening expertise in specialist business lines and high value added broking services;
ii) Increasing capacity and attracting new capital into Singapore;
iii) Strengthening Singapore's position as a hub for captive domicile
Let me elaborate briefly.
i) Deepening expertise in specialist business lines and high value added broking services;
Within Asia, there will be increased demand for specialist insurance products - among the factors, the increased trade and infrastructure development, and a rise in Asian wealth.
Singapore as an established insurance and reinsurance centre and with a growing pool of specialized insurers, will be able to play a bigger role for example in the lines of marine and aviation insurance, trade credit insurance, energy, directors and officers' liability, professional indemnity, retakaful and HNWI life insurance.
Building up the talent pool of experienced and competent underwriters, claims managers and brokers in these specialist areas is a key success factor.
The insurance industry does not only compete within itself for talent, but also faces strong competition from other financial sectors and non-financial industries.
The talent war is not just within a jurisdiction but across borders. I therefore encourage industry professionals like yourselves and the industry associations to take the lead in promoting professional education and upgrading of competencies. We can for example raise the expertise level and international exposure of the existing pool of underwriters and brokers in Singapore.
To support such endeavours, the MAS has a Financial Training Scheme that is available to the insurance industry. This provides co-funding in the training of your staff in specialized areas, and includes support for training on the job when staff is sent overseas for as long as 6-12 months. It is not only about talent stock but also talent pipeline.
The industry collectively should consider how to better profile career prospects and job opportunities by reaching out to fresh graduates and new job entrants.
I also see insurance brokers as playing an important and key role in the development of Singapore as an insurance and reinsurance centre.
The role of the broker is evolving. From the matching and placing of insurance risks for their clients with insurers and reinsurers in the past, brokers have moved up the value chain to provide added services to remain competitive and relevant.
The risks faced by clients have become much more complicated given regionalization and globalization of businesses. Brokers have had to keep up - not only in understanding the developments within their clients' areas of activities but also the gamut of new potential exposures and risks their clients face.
Only then, can they provide value-adding risk management and insurance advice. In addition new financial industries and activities are developing within Asia, and brokers as key intermediaries, have to keep up on a steep learning curve.
Reinsurance brokers whose clients are the direct insurance companies, are similarly moving up the value chain of services.
Expertise is being built in more sophisticated advisory offerings like catastrophe modeling, dynamic financial analysis and financial modeling, actuarial consulting and even capital management and capital market solutions which investment banks traditionally have provided.
These will be areas which insurance companies in Asia will increasingly demand as they seek to manage their insurance and financial risks holistically. I encourage the broking community to similarly consider tapping the MAS training scheme to build capabilities in support of new and increased business needs.
In addition, insurers and brokers should also consider allocating resources - hopefully in your Singapore offices - to conduct research that will strengthen and support the ability to understand, quantify and price Asian risks.
There is room to build or refine existing catastrophe models for the various Asian catastrophic risks, but also in the area of life and health insurance with respect to disease pandemics, mortality and longevity risks in Asia.
This may be done in collaboration with various academia and health institutes in Singapore and the region. MAS is willing to explore this with the industry and to help facilitate the establishment of a network between industry and academia, if the industry thinks this is useful.
Such research can go a long way in enhancing the quality of insurance underwriting and risk control, as well as helping insurers and brokers to innovate new products.
This will also serve to prepare the ground for the time when insurers in Asia need to tap the capital markets more aggressively to diversify their catastrophe risks or raise funding through securitization of their future profits or liabilities.
Capital market investors who are unfamiliar with insurance risks will need to understand how insurance risks behave and how they can be modelled and quantified, before buying insurance linked capital market products.
The MAS has a financial research scheme that can be tapped should you consider the building of such research capabilities as a necessary competitive advantage. My colleagues in the market development function will be happy to provide details.

Source: News Release 17 May 2006

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