Speech by Ms Indranee Rajah, Minister in The Prime Minister's Office, Second Minister for Finance and National Development, at The Singapore Insurance Brokers' Association's 50th Anniversary Celebrations on 5 October 2023, at Marina Bay Sands
05 Oct 2023Ms Ng Leng Leng, President of Singapore Insurance Brokers’ Association (SIBA),
Council Members of SIBA,
Distinguished guests,
Ladies and gentlemen.
Introduction
First, let me start by thanking you for the warm welcome, and for inviting me to join you for this milestone event. Congratulations on achieving your 50th anniversary – it is a cause for celebration! Please give yourselves a big round of applause!
Volatile and uncertain external environment
2. I understand that you had a panel discussion earlier today on ‘Future-proofing our Financial Hub – Plugging the Talent Gap’. That is an interesting topic, because many of the other professions are wrestling with that same issue as well. The competition for talent is fierce and keen, and it is a timely reminder on the importance of continuously building and developing our capabilities and talent, so that your sector and your organisations are better prepared to navigate the challenges and complexities of our external environment.
3. Our external environment is increasingly uncertain and volatile. A year on, the escalated Russia-Ukraine conflict continues to stress the world’s financial, energy, food and commodity markets.
4. Geopolitical shifts and escalating trade tensions have also caused countries to turn inward, prioritising domestic and national security over keeping their trade and markets open. This threatens small and open economies, like Singapore.
5. We cannot completely insulate ourselves against external risks and threats; therefore, it is imperative that we understand the risks at hand, identify opportunities in the environment and better strategise to navigate these uncertainties, which are beyond our control.
Risks and Strategy
6. As insurance brokers, all of you play a unique role for this, as you build relations and serve as the bridge between businesses and insurers. You analyse and advise – by helping businesses understand their exposure to risks, how to manage these effectively, facilitate businesses’ access to customised risk-financing solutions; and you foster collaboration – by working closely with insurers to better tailor insurance solutions and bringing different parties together for innovative approaches.
7. On the strategy front – with more effective strategies, better risk management and being able to identify and seize opportunities, you can strengthen these bridges of trust. You have the data, the analytics, and the risk insights, which are valuable to help businesses manage risks and strategise for growth. The concept of insurance is being transformed with technology and data advancement, which allows insurers to support risk prevention and transfer, and better outcomes. This is vital for emerging areas of risks, such as cyber and climate risks. More meaningful data sets could be captured with more advanced analytics and data collection tools, which can help to uncover more acute risk insights to more suitably size and price risks.
8. Let me elaborate on some pertinent risks and opportunities for the finance and insurance sectors.
Pandemic Risks
9. Firstly, pandemic risks.
10. Countries and the world economy are still recovering from its long battle against COVID-19. Many put up sizeable Government budget stimulus measures and relief schemes to counteract the disruptions and the fallouts from the pandemic. But this had been at the expense of government expenditure in other areas, like climate. We will need to put in place measures to build longer-term financial resilience to future pandemics, which may be just around the corner.
11. During the pandemic, we saw how the insurance sector leveraged opportunities and adapted to offer coverage to mitigate disruption arising from the pandemic, such as for event and travel cancellations. This was uncommon before COVID-19. However, more can be done.
12. One area is in improving the affordability, accessibility and quality of business interruption insurance, so that it is better tailored to businesses. Currently, business interruptions caused by a pandemic is not covered, or is expensive and limited in scope. Nonetheless, as the world learnt to live with the pandemic and business interruptions became less severe, insurers adopted a more accommodating view towards claims arising from pandemic-induced business interruptions.
13. We will also need to take on a more resilient approach for economies and businesses to support pandemic risk sharing and risk pooling. A possibility is adopting a private-public approach on pandemic risk financing for more critical or vulnerable sectors – the combination of finances from the Government, firms in these sectors, and insurers, would provide rapid relief.
14. Besides innovative approaches, the availability of quality data will support these efforts and facilitate a more efficient and effective coverage. Take for example, the COVID-19 pandemic – it has provided good data points for the insurance and risk modelling industry, so that further risks analytics and modelling can lead to better-tailored solutions.
15. Exchanging insights with the financial services industry on behaviours and policies to better promote pandemic resilience in businesses, such as business continuity plans and greater digital adoption, will also boost resilience to future pandemics.
16. Singapore is actively moving towards building stronger capabilities in newer lines of risks, including pandemic and climate risks. A key platform is the Global-Asia Insurance Partnerships (GAIP), which is a centre of excellence and a tripartite partnership between the global insurance industry, regulators and academia. It is developing actionable research insights and policy recommendations, and co-creating innovative solutions to build long-term risk resilience in Asia. I am heartened to see that top global insurance brokers including Aon, Marsh McLennan and WTW are partners in the GAIP, and I would encourage more of the broking community to support this partnership.
Climate Risks
17. Next, let me touch on climate risks.
18. Extreme weather conditions and natural catastrophes are becoming more common, with heat waves, drought and wildfires increasing in frequency and severity around the world. Companies’ risk-return profiles will be impacted by such climate risks, which can result in severe disruption to businesses and lead to substantial income and productivity losses. These can also make certain risks uninsurable or unaffordable.
19. Times ahead will be challenging. The pace of growth for Asia’s protection needs from natural disasters will likely outgrow the speed at which Asia’s insurance markets are growing. There is also a lack of high-quality data to accurately quantify risk exposures for such climate risks and build reliable models. This will need to be addressed with a combination of both traditional and alternative solutions.
20. In this regard, Singapore has been strengthening its efforts to support the development of alternative risk transfer solutions, such as risk pools and insurance-linked securities (ILS). ILS can complement traditional insurance through transferring risk exposures to the capital markets, and thereby increasing risk underwriting capacity. Singapore is the largest Asia Pacific domicile for ILS, and at present has capabilities such as risk modelling, management of ILS entities and loss reserve specialists. We aim to deepen and expand these capabilities across the entire ILS value-chain in Singapore, and anchor investors and structurers here. We are also enhancing our corporate and regulatory regime to support a wider range of ILS risks and instruments. Several of the global broking firms have strong capabilities in ILS structuring, and we encourage you to bring them to Singapore to support Asia’s growing risk transfer needs.
Green and Transition Risk Financing
21. Another area of opportunity will be in green and transition risk financing. As intermediaries between insurers and businesses, you can support companies in identifying and assessing their exposure to environmental and transition risks. This is crucial for informed decision making. By leveraging your extensive knowledge of insurance markets, you can help businesses secure insurance solutions tailored for such risks, and share valuable insights on climate risk mitigation strategies. This is especially pertinent to key sectors and infrastructure, such as the energy and chemicals, aviation and shipping sectors – which are inherently not green.
Trust
22. I now turn to another aspect of external environmental threat: the breakdown of trust, and how this has impacted social cohesion. Globally, we have seen deepening divisions and polarisation, lending itself to further distrust within societies, including between people and its governments.
23. We are fortunate that Singapore is a high-trust society. This was especially exemplified through and during the COVID-19 pandemic. Singaporeans trusted the Government to navigate them through the storm. The Government relied on people to do their part. And we all played our part as one people.
24. We could only have managed this because we stand on a firm bedrock of trust, built up over time between the Government and generations of Singaporeans. This trust is hard-earned and precious. Trust is easy to lose, and even harder to regain – which is why it requires an unwavering commitment from all of us, across all stations of life, to ensure we never allow this bedrock of trust to erode.
25. Earlier this week, my colleagues and I spoke in Parliament about Singapore’s Anti-Money Laundering regime. While we have a robust regime in place against money laundering, this is an unending endeavour. As the recent high-profile case has shown, criminals are becoming increasingly sophisticated, and they will find new loopholes to exploit.
26. We are determined to preserve Singapore’s hard-earned reputation as a clean and trusted business hub, and we aim to maintain this balance with being open to legitimate business. That is why my colleagues and I will also be working via an Inter-Ministerial Committee to review our system and to keep our regime up to date with increasingly sophisticated crimes.
27. We can all play a part to strengthen Singapore’s system of trust. Owing to our status as one of the leading major international financial hubs in the world, there are vast volumes of transactions in Singapore. Therefore, we need to rely on various stakeholders, like the financial institutions and gatekeepers like yourselves, to conduct the necessary checks and detect possible risks, and to provide honest and responsible advice.
28. As gatekeepers, you stand at the first line of defence in our eco-system against such money laundering activities – and you are one of the crucial partners in keeping the trust and confidence that the public, investors and the rest of the world have in us.
Enablers for the Future
29. Whilst the global outlook looks pessimistic, it is perhaps reassuring that there are three key enablers – data, partnerships and talent – which are the bedrocks in tackling these challenges and uncertainties. It is heartening that there are already existing initiatives and efforts, like the GAIP, which I mentioned earlier. However, we must continue this momentum and continue fostering partnerships between the Government and the industry, pooling our resources, expertise and perspectives to deliver innovative solutions and enhance our resilience to these complex risks.
30. And we must never forget, our people are our best resources – and they are the core of building capabilities for the sector. We must work at growing a continuous pipeline of talent for the insurance and risk management industry, with skills in emerging areas like big data, artificial intelligence and sustainability. I am certain that the sector will flourish with strong leadership and talent.
Conclusion
31. While the economic shifts and geopolitical tensions bring about risks and threats, we must remember that opportunities are also born out of crises. Only by better understanding risks, identifying and seizing opportunities through our key enablers of data, partnerships and talent, we can effectively navigate these uncertainties.
32. In closing, let me congratulate the Singapore Insurance Brokers’ Association once again on reaching your jubilee milestone. May the Association go from strength to strength, build upon your capabilities, and continue contributing to Singapore’s system of trust.
33. Thank you very much.
Council Members of SIBA,
Distinguished guests,
Ladies and gentlemen.
Introduction
First, let me start by thanking you for the warm welcome, and for inviting me to join you for this milestone event. Congratulations on achieving your 50th anniversary – it is a cause for celebration! Please give yourselves a big round of applause!
Volatile and uncertain external environment
2. I understand that you had a panel discussion earlier today on ‘Future-proofing our Financial Hub – Plugging the Talent Gap’. That is an interesting topic, because many of the other professions are wrestling with that same issue as well. The competition for talent is fierce and keen, and it is a timely reminder on the importance of continuously building and developing our capabilities and talent, so that your sector and your organisations are better prepared to navigate the challenges and complexities of our external environment.
3. Our external environment is increasingly uncertain and volatile. A year on, the escalated Russia-Ukraine conflict continues to stress the world’s financial, energy, food and commodity markets.
4. Geopolitical shifts and escalating trade tensions have also caused countries to turn inward, prioritising domestic and national security over keeping their trade and markets open. This threatens small and open economies, like Singapore.
5. We cannot completely insulate ourselves against external risks and threats; therefore, it is imperative that we understand the risks at hand, identify opportunities in the environment and better strategise to navigate these uncertainties, which are beyond our control.
Risks and Strategy
6. As insurance brokers, all of you play a unique role for this, as you build relations and serve as the bridge between businesses and insurers. You analyse and advise – by helping businesses understand their exposure to risks, how to manage these effectively, facilitate businesses’ access to customised risk-financing solutions; and you foster collaboration – by working closely with insurers to better tailor insurance solutions and bringing different parties together for innovative approaches.
7. On the strategy front – with more effective strategies, better risk management and being able to identify and seize opportunities, you can strengthen these bridges of trust. You have the data, the analytics, and the risk insights, which are valuable to help businesses manage risks and strategise for growth. The concept of insurance is being transformed with technology and data advancement, which allows insurers to support risk prevention and transfer, and better outcomes. This is vital for emerging areas of risks, such as cyber and climate risks. More meaningful data sets could be captured with more advanced analytics and data collection tools, which can help to uncover more acute risk insights to more suitably size and price risks.
8. Let me elaborate on some pertinent risks and opportunities for the finance and insurance sectors.
Pandemic Risks
9. Firstly, pandemic risks.
10. Countries and the world economy are still recovering from its long battle against COVID-19. Many put up sizeable Government budget stimulus measures and relief schemes to counteract the disruptions and the fallouts from the pandemic. But this had been at the expense of government expenditure in other areas, like climate. We will need to put in place measures to build longer-term financial resilience to future pandemics, which may be just around the corner.
11. During the pandemic, we saw how the insurance sector leveraged opportunities and adapted to offer coverage to mitigate disruption arising from the pandemic, such as for event and travel cancellations. This was uncommon before COVID-19. However, more can be done.
12. One area is in improving the affordability, accessibility and quality of business interruption insurance, so that it is better tailored to businesses. Currently, business interruptions caused by a pandemic is not covered, or is expensive and limited in scope. Nonetheless, as the world learnt to live with the pandemic and business interruptions became less severe, insurers adopted a more accommodating view towards claims arising from pandemic-induced business interruptions.
13. We will also need to take on a more resilient approach for economies and businesses to support pandemic risk sharing and risk pooling. A possibility is adopting a private-public approach on pandemic risk financing for more critical or vulnerable sectors – the combination of finances from the Government, firms in these sectors, and insurers, would provide rapid relief.
14. Besides innovative approaches, the availability of quality data will support these efforts and facilitate a more efficient and effective coverage. Take for example, the COVID-19 pandemic – it has provided good data points for the insurance and risk modelling industry, so that further risks analytics and modelling can lead to better-tailored solutions.
15. Exchanging insights with the financial services industry on behaviours and policies to better promote pandemic resilience in businesses, such as business continuity plans and greater digital adoption, will also boost resilience to future pandemics.
16. Singapore is actively moving towards building stronger capabilities in newer lines of risks, including pandemic and climate risks. A key platform is the Global-Asia Insurance Partnerships (GAIP), which is a centre of excellence and a tripartite partnership between the global insurance industry, regulators and academia. It is developing actionable research insights and policy recommendations, and co-creating innovative solutions to build long-term risk resilience in Asia. I am heartened to see that top global insurance brokers including Aon, Marsh McLennan and WTW are partners in the GAIP, and I would encourage more of the broking community to support this partnership.
Climate Risks
17. Next, let me touch on climate risks.
18. Extreme weather conditions and natural catastrophes are becoming more common, with heat waves, drought and wildfires increasing in frequency and severity around the world. Companies’ risk-return profiles will be impacted by such climate risks, which can result in severe disruption to businesses and lead to substantial income and productivity losses. These can also make certain risks uninsurable or unaffordable.
19. Times ahead will be challenging. The pace of growth for Asia’s protection needs from natural disasters will likely outgrow the speed at which Asia’s insurance markets are growing. There is also a lack of high-quality data to accurately quantify risk exposures for such climate risks and build reliable models. This will need to be addressed with a combination of both traditional and alternative solutions.
20. In this regard, Singapore has been strengthening its efforts to support the development of alternative risk transfer solutions, such as risk pools and insurance-linked securities (ILS). ILS can complement traditional insurance through transferring risk exposures to the capital markets, and thereby increasing risk underwriting capacity. Singapore is the largest Asia Pacific domicile for ILS, and at present has capabilities such as risk modelling, management of ILS entities and loss reserve specialists. We aim to deepen and expand these capabilities across the entire ILS value-chain in Singapore, and anchor investors and structurers here. We are also enhancing our corporate and regulatory regime to support a wider range of ILS risks and instruments. Several of the global broking firms have strong capabilities in ILS structuring, and we encourage you to bring them to Singapore to support Asia’s growing risk transfer needs.
Green and Transition Risk Financing
21. Another area of opportunity will be in green and transition risk financing. As intermediaries between insurers and businesses, you can support companies in identifying and assessing their exposure to environmental and transition risks. This is crucial for informed decision making. By leveraging your extensive knowledge of insurance markets, you can help businesses secure insurance solutions tailored for such risks, and share valuable insights on climate risk mitigation strategies. This is especially pertinent to key sectors and infrastructure, such as the energy and chemicals, aviation and shipping sectors – which are inherently not green.
Trust
22. I now turn to another aspect of external environmental threat: the breakdown of trust, and how this has impacted social cohesion. Globally, we have seen deepening divisions and polarisation, lending itself to further distrust within societies, including between people and its governments.
23. We are fortunate that Singapore is a high-trust society. This was especially exemplified through and during the COVID-19 pandemic. Singaporeans trusted the Government to navigate them through the storm. The Government relied on people to do their part. And we all played our part as one people.
24. We could only have managed this because we stand on a firm bedrock of trust, built up over time between the Government and generations of Singaporeans. This trust is hard-earned and precious. Trust is easy to lose, and even harder to regain – which is why it requires an unwavering commitment from all of us, across all stations of life, to ensure we never allow this bedrock of trust to erode.
25. Earlier this week, my colleagues and I spoke in Parliament about Singapore’s Anti-Money Laundering regime. While we have a robust regime in place against money laundering, this is an unending endeavour. As the recent high-profile case has shown, criminals are becoming increasingly sophisticated, and they will find new loopholes to exploit.
26. We are determined to preserve Singapore’s hard-earned reputation as a clean and trusted business hub, and we aim to maintain this balance with being open to legitimate business. That is why my colleagues and I will also be working via an Inter-Ministerial Committee to review our system and to keep our regime up to date with increasingly sophisticated crimes.
27. We can all play a part to strengthen Singapore’s system of trust. Owing to our status as one of the leading major international financial hubs in the world, there are vast volumes of transactions in Singapore. Therefore, we need to rely on various stakeholders, like the financial institutions and gatekeepers like yourselves, to conduct the necessary checks and detect possible risks, and to provide honest and responsible advice.
28. As gatekeepers, you stand at the first line of defence in our eco-system against such money laundering activities – and you are one of the crucial partners in keeping the trust and confidence that the public, investors and the rest of the world have in us.
Enablers for the Future
29. Whilst the global outlook looks pessimistic, it is perhaps reassuring that there are three key enablers – data, partnerships and talent – which are the bedrocks in tackling these challenges and uncertainties. It is heartening that there are already existing initiatives and efforts, like the GAIP, which I mentioned earlier. However, we must continue this momentum and continue fostering partnerships between the Government and the industry, pooling our resources, expertise and perspectives to deliver innovative solutions and enhance our resilience to these complex risks.
30. And we must never forget, our people are our best resources – and they are the core of building capabilities for the sector. We must work at growing a continuous pipeline of talent for the insurance and risk management industry, with skills in emerging areas like big data, artificial intelligence and sustainability. I am certain that the sector will flourish with strong leadership and talent.
Conclusion
31. While the economic shifts and geopolitical tensions bring about risks and threats, we must remember that opportunities are also born out of crises. Only by better understanding risks, identifying and seizing opportunities through our key enablers of data, partnerships and talent, we can effectively navigate these uncertainties.
32. In closing, let me congratulate the Singapore Insurance Brokers’ Association once again on reaching your jubilee milestone. May the Association go from strength to strength, build upon your capabilities, and continue contributing to Singapore’s system of trust.
33. Thank you very much.