Having made its insurance-linked securities (ILS) grant scheme more restrictive back in 2023, to only offer the grant to catastrophe bonds or ILS covering regional risks from Asia Pacific, Singapore is reversing that move and expanding the ILS grant offering once again to cover cat bond risks from other locations around the globe, it appears.
Around late 2017, Singapore drew up plans for an ILS Grant Scheme, to help fund some of the upfront costs incurred in issuing catastrophe bonds in the country under its nascent regulatory regime for insurance-linked securities (ILS).
The grant was a way to attract issuers and broker teams to stimulate activity in Singapore’s ILS market.
The ILS Grant Scheme proved very successful, in attracting 25 separate Singapore located catastrophe bond issuances so far, all are listed in the Artemis Deal Directory, in addition to which Singapore has acted as the domicile and host to five issuances of a collateralised reinsurance sidecar that benefits MS Amlin in Asia.
Up until 2023, Singapore welcomed and provided grant support to catastrophe bond issuances from all over the world.
In fact the majority of the cat bonds issued there up to 2023 came from sponsors located outside of Asia Pacific and covered risks from other regions as well, as ceding companies looked to benefit from reduced cat bond issuance expenses with the help of the grant.
Then, the terms of Singapore’s ILS Grant Scheme were tightened to mean the risks featured in any cat bond or ILS that could benefit from the grant had to come from the Asia Pacific region, or the sponsor needed to be located there.
With that tightening of the grant terms, the number of catastrophe bonds issued in Singapore slowed and since June 2022 just five cat bond issues had come to market, from Japanese insurer sponsors and the NZ Earthquake Commission, as well as a number of sidecar renewals from MS Amlin Asia Pacific.
Now, at the SIRC event in Singapore this morning, Monetary Authority of Singapore (MAS) Managing Director Chia Der Jiu has indicated in a keynote speech that the ILS Grant Scheme is becoming more open again.
Chia explained in his speech that ILS penetration remains low in the region and hence MAS intends to continue working to promote the use of instruments such as catastrophe bonds and collateralised reinsurance structures, while also calling for those in the industry to engage with the Authority.
“Singapore’s deep and diverse risk management ecosystem allows us to serve as a regional centre for risk financing and alternative capital,” Chia explained.
He further stated that the investor base that is interested in ILS opportunities is expanding, and it remains an attractive asset class for institutional allocators in the Asia Pacific region.
MAS also anticipates growing ILS momentum, as the need to cover climate and catastrophe risks increases in APAC.
As a result, the Monetary Authority of Singapore (MAS) has refreshed its ILS Grant Scheme offering, Chia said.
Explaining that, “To encourage broader market participation and innovation we will extend our support to cover non-APAC risks and renewable energy projects, while continuing to prioritise support for insurers that directly address protection needs within the APAC region.”
Which appears to indicate that the ILS Grant is set to become more readily available to more of the sponsors that utilise the catastrophe bond market the most frequently, making it less restrictive than it had become in 2023’s update. Full details as to precisely what type of ILS issuance, sponsor and peril will qualify for the grant are not yet available.
Chia further stated that, “We welcome sponsors and asset managers and owners that are key to establish ILS structuring, or investment teams here, to engage MAS directly.”
All of which suggests that MAS and Singapore remain committed to fostering a vibrant insurance-linked securities marketplace in the country, but also that there is an awareness that the changes implemented to the ILS Grant may have hindered activity levels there in recent years.
Full details of the updates to Singapore’s ILS Grant Scheme are not yet available, so it’s not clear exactly how the expanded qualification for the grants will apply and who to, in terms of sponsors.
But it looks like this could widen the net again and help to build ILS activity in Singapore, if its ILS market platform becomes open to a broader range of risks and sponsors.
