SINGAPORE – Finance Minister Lawrence Wong said Monday (November 15) that the insurance industry can help economies in the region cope with the effects of climate change and digital transformation.
At the Singapore International Virtual International Reinsurance Conference, he added, the COVID-19 pandemic has disrupted global economic activity and exposed the fragility of health and social infrastructure, even as the world continues to grapple with challenges such as climate change and cyber risks.
But Asia’s fundamentals remain strong, with the region leading globally in economic growth, the rise of the middle class, wealth creation and urbanization, said Wong, who is also vice chairman of the Monetary Authority of Singapore.
“As Asia grows, more lives, wealth and assets will need protection,” he added, noting that the region’s insurance market is growing almost twice as fast as the global market, at an estimated 8 percent annually until 2030.
He said the future of climate change will be won or lost in Asia, which accounts for more than half of global greenhouse gas emissions.
Asia also accounted for 55 of the 163 natural disasters worldwide in the first half of this year, resulting in economic losses of US$24 billion (S$32.4 billion). Emerging economies make up half of the top 10 countries in Asia most affected by climate risks.
“Climate change will exacerbate the frequency and severity of natural disasters, and widen the protection gap against natural disasters,” said Mr. Wong.
He added that the industry is an important partner in deploying alternative risk financing solutions, including government risk pools and insurance-linked securities (ILS), which can ensure protection that best matches the volume of coverage required.
He cited the Southeast Asian Catastrophe Risk Insurance Facility, based in Singapore, and its partner Japan’s Ministry of Finance and the World Bank. It provides solutions to climate change and disaster resilience for ASEAN member states, and its first solution – a flood insurance pool in Laos – was launched in February.
International labor standards such as catastrophe bonds enable the reinsurance industry to transfer and raise additional financing from the capital markets to meet extreme catastrophe risks.
“Singapore will play our part in supporting the development of insurance related securities in the Asia Pacific region, with a sound regulatory and legal system, and a growing base and expertise of ILS service providers,” said Mr. Wong.
He noted that 18 ILSs have been issued here in the past three years, covering a range of natural disasters, including hurricanes, floods and storms, across Asia and Australia.
He added that insurance companies can also offer financing solutions to help reduce risks and deploy more climate-friendly technology and infrastructure solutions in the region.
“Importantly, insurers can also use your influence and your voice as an investor, in the service of climate transition. The insurance industry has total assets under management of approximately US$35 trillion. You are well positioned to channel larger capital flows towards climate-resilient assets,” Wong said. and low carbon.
He added that technology and big data helped insurance companies in the field of risk prevention.
Many of them, including life insurance companies in Singapore, have started tracking users’ health and habits through fitness devices and apps, for example. The data is then used to price premium discounts for healthy habits by the consumer.
Wong said that many insurance companies are still burdened with legacy technology regulations, and they can get help from insurance technology companies for their digital transformation. Old technical systems are those that are outdated.
Insurtech’s investment in Singapore nearly quadrupled to $95 million last year.
There are also opportunities in the growing cyber insurance market as the growth of the digital economy has increased cyber risks, he said, noting that Asia accounted for more than a quarter of global cyber attacks this year.
“Such cyber attacks not only damage the company’s technological assets, but also cause financial and reputational losses, limiting future business growth.”
Mr. Wong added that Singapore is doing its part to support efforts to develop the emerging electronic insurance market.
For example, many electronic insurance companies are customizing solutions that combine cyber risk capacity building, risk assessment and financing for small and medium-sized enterprises – an underserved segment of the electronic insurance market.