SINGAPORE: The Monetary Authority of Singapore is currently developing the market for insurance-linked securities (ILS) as an alternative risk-financing solution, said Acting Prime Minister Heng Swee Keat on Wednesday (Jun 12).
This can help strengthen Asia’s resiliency against natural catastrophes – one of the three broad ways Singapore can contribute to sustainable growth in the region, according to Mr Heng.
The other two ways include bridging partnerships for regional infrastructure development opportunities through Singapore’s Infrastructure Asia initiative, and promoting sustainable economic growth by growing its sustainable finance sector.
“Singapore seeks to contribute to Asia’s sustainable growth by serving as a key node for channelling financing to the region,” he said.
Mr Heng, who is also Singapore’s Finance Minister, was speaking at the Official Monetary and Financial Institutions Forum’s (OMFIF) Global Public Investor Launch held at the Singapore Exchange. This is the first time the launch of the annual publication is held in Asia.
In his keynote speech, Mr Heng said the world is now looking for “a new sustainable equilibrium” after rapid growth over the last 50 years led to growing environmental challenges, such as rising global surface temperature and sea levels.
“The world is now in search of a new sustainable equilibrium – one that will enable us to achieve good economic progress while also protecting the environment.”
Citing estimates from the United Nations Economic and Social Commission for Asia and the Pacific, Mr Heng said Asia’s economic losses from natural disasters and weather catastrophes could reach US$160 billion per year by 2030.
But while rapid growth and quickening urbanisation can put significant pressure on public services, infrastructure and the environment in Asia, there are opportunities too.
In particular, investments in science and technology can open up many new possibilities for sustainable development, he said. This is already underway in many countries, like China and Japan.
“How we invest and how we respond to these pressures will determine whether Asia’s growth is sustainable,” said Mr Heng.
Asia can continue to benefit from more investments, he added, noting that Singapore can contribute by “serving as a key node for channelling financing to the region”.
One of which is to help the region build up its resiliency against natural catastrophes.
Mr Heng noted that only about 5 per cent of the economic losses are insured in developing Asia.
“This puts tremendous strain on governments of developing nations in the event of a natural catastrophe, which can set back economic progress in affected areas for years to come.”
Noting how the MAS is currently developing the market for insurance-linked securities (ILS) as an alternative risk-financing solution, he said this will help address protection gaps, diversify the costs of natural catastrophe events and alleviate the fiscal burdens on governments.
A Natural Catastrophe Data Analytics Exchange has also been set up to support the structuring, modelling and securitisation of ILS transactions through improving data quality and promoting standardisation.
The MAS has also introduced an ILS grant scheme to defray the costs associated with issuing a catastrophe bond in Singapore, he said. The first such bond was issued out of Singapore earlier this year.
“We hope to grow this to better meet Asia’s needs for protection against disasters,” said Mr Heng.
Singapore can also contribute to Asia’s sustainable development through its Infrastructure Asia office set up in 2017.
Private sector financing forms a crucial component of infrastructure development, yet only about 10 per cent of infrastructure in the region are readily bankable. An estimated 30 per cent could become bankable if given added support, said Mr Heng.
Infrastructure Asia aims to build up both the supply and demand for bankable infrastructure projects in the region, he added.
One example is the China-Singapore Co-Investment Platform between Surbana Jurong and the Silk Road Fund. Brokered by Infrastructure Asia, the US$500 million platform will focus on financing greenfield infrastructure projects to help sustainable economic and social growth of Southeast Asian communities.
Singapore has also been growing its sustainable finance sector – another way in which it can contribute to the region’s sustainable growth.
The Monetary Authority of Singapore (MAS), for instance, has been nurturing the growth of green, social and sustainability bonds through the introduction of a Green Bond Grant scheme in 2017. This has been expanded to include social and sustainability bonds this year, he said.
“So far, over S$6 billion worth of green bonds have been issued here and we aim to further scale this up over time,” said Mr Heng.