SINGAPORE Law and Practice Contributed by: Simon Goh and Wang Ying Shuang, Rajah & Tann Singapore LLP
11. Emerging Risks and New Products 11.1 Emerging Risks Affecting the Insurance Market The Singapore Cyber-Risk Pool The Asean region’s growing strategic relevance and expanding digitalisation make it a prime target for cyber-attacks. Furthermore, cyber-resilience is gen- erally low in some countries in the region, which have varying levels of cyber-readiness. Cyber-attacks can result in sometimes substantial financial and reputa- tional damage, and could also derail the region’s digi- tal innovation agenda. To address the growing concerns around cyber-risks, Singapore announced the launch of the world’s first commercial cyber-risk pool, a facility for providing cyber-insurance to corporate buyers, as cyber-attacks become more pervasive. The pool will allow com- panies in Asean countries and Asia to be protected against cyber-related losses, and was developed and set up in collaboration with the Singapore Reinsurers’ Association. The Singapore cyber-risk pool committed up to USD1 billion of capacity to the cyber-insurance problem, bringing together both traditional insurance and insur- ance-linked securities markets to provide bespoke cybersecurity coverage. The cyber-risk pool reflects Singapore’s standing as a specialty insurance hub and its commitment to creating forward-looking insurance solutions to tackle new and emerging risks. ILS In an attempt to address risks brought on by the COV- ID-19 pandemic and climate change (an issue that has plagued the industry for some time), and in line with the regulator’s determination to make Singapore an ILS domicile for Asia, Singapore has taken progres- sive strides towards developing the ILS market in the country. The MAS hopes that a vibrant ILS market will help to provide additional insurance capacity through financing from the capital markets that can be catered towards all forms of risks (natural catastrophes, lon- gevity, mortality, operational risks, cyber-risks, etc) and therefore narrow the protection gap in Asia. The
MAS has adopted a three-pronged approach to grow the ILS market and ecosystem in Singapore: • improving data quality and the standardisation in the region to develop industry loss-based indices upon which ILS can be structured; • establishing and enhancing Singapore’s regulatory, tax and legal infrastructure to support various ILS instruments; and • developing a Singapore ILS ecosystem through incentivising ILS issuers to domicile their ILS in Singapore through the ILS grant scheme, encour- aging ILS service providers to anchor their opera- tions here. As mentioned in 7.1 ART Transactions , a dedicated set of regulations apply to SPRVs that issue ILS. The regulators are considering extending corporate struc- tures like the Variable Capital Company (VCC) (intro- duced in 2018) to the insurance industry, to provide more structuring options to potential ILS issuers. It is hoped that the VCC or a similar structure would facili- tate multiple issuances in one vehicle with its ability to segregate assets and liabilities. To incentivise ILS issuers to domicile their ILS in Sin- gapore, the MAS has extended the current ILS grant scheme until the end of 2028. To provide tax neutral- ity for ILS vehicles and for the notes issued, Singa- pore has also extended the tax incentive schemes for Approved Special Purpose Vehicles engaged in insur- ance securitisation and for Qualified Debt Securities, until 31 December 2028. The ILS grant and tax incentive scheme led to 29 catastrophe bonds being issued in Singapore between December 2018 and November 2025, with a total issuance amount exceeding USD4 billion. In addition to these 29 catastrophe bonds, the first sovereign catastrophe bond in Asia issued under a World Bank programme covering the Philippines’ earthquake and tropical cyclone risks was listed on the Singapore Exchange in late 2019. Southeast Asia Disaster Risk Insurance Facility (SEADRIF) With the increasing frequency and severity of natu- ral catastrophes in South-East Asia, the need to
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