MAS developing ILS market to boost disaster resilience

Alternative risk financing to provide quick response to intensifying natural disasters in the region

MAS developing ILS market to boost disaster resilience

Insurance News

By Gabriel Olano

To help strengthen the region’s resilience to natural disasters, the Monetary Authority of Singapore (MAS) is developing the market for insurance-linked securities (ILS), according to acting Prime Minister Heng Swee Keat.

Heng, who spoke at the Official Monetary and Financial Institutions Forum’s Global Public Investor report launch, said that developing an ILS market is Singapore’s contribution to strengthening resilience in the region, the Straits Times reported.

ILS is an alternative risk financing solution complementing traditional insurance, and can provide quick financing in the wake of major natural disasters in the region.

According to Heng, only around 5% of economic losses in developing Asian economies are insured, despite intensifying natural disasters brought about by climate change.

“This puts tremendous strain on governments of developing nations in the event of a natural catastrophe, which can set back economic progress in the affected areas for years to come,” he said.

To boost the development of the ILS market, MAS has formed a Natural Catastrophe Data Analytics Exchange, Heng said. This initiative allows structuring, modelling and securitisation of ILS transactions by improving data quality and fostering standardisation. MAS has also introduced a grant scheme to defray the costs of issuing catastrophe bonds in Singapore.

Heng mentioned two more ways in which Singapore can contribute to sustainable growth in the region.

The Infrastructure Asia initiative can serve as an avenue for institutions to invest in infrastructure development opportunities, he said. Meanwhile, Singapore is also growing its sustainable finance sector by promoting new instruments such as green, social, and sustainability bonds.

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