As Singapore continues to work on plans to adopt a regulatory framework for a Protected Cell Company (PCC) structure to support collateralised reinsurance and ILS issuance, Simon Goh of law firm Rajah & Tann Singapore, has expressed how this flexible structure could ultimately become a game changer for the country’s captive insurance and ILS landscape.
Given this, Artemis recently spoke to Simon Goh who leads Rajah & Tann Singapore’s Insurance & Reinsurance Practice, who shared how he feels this structure will impact the country’s ILS landscape.
Goh is an experienced lawyer who has worked on the majority of catastrophe bond issuance and other ILS activities across Singapore. He also contributed to industry feedback on the regulatory regime for ILS in the country too.
As we’ve explained before in previous articles, MAS’ consultation process is long-awaited, as Singapore has been actively discussing a regulatory framework and vehicle to support collateralised reinsurance and efficient ILS arrangements for a number of years now.
Whilst speaking to Artemis about Singapore’s new plans for a PCC structure, Goh explained why he thinks this flexible ILS structure could become a game changer for Singapore.
“To me, this will be a real game changer for the captive insurance and ILS landscape in Singapore. For the captive insurance market, the PCC structure will widen the pool of potential corporates that can have its own captive insurer in the form of a cell of a rent-a-captive insurer. Currently, only large corporates such as MNCs will be able to justify the costs and resources required to establish their own captive insurance company,” Goh said.
“For ILS, having the option to structure an ILS within a cell of a PCC would allow for smaller ILS transactions and open a new market of ILS sponsors, who would otherwise not find it economical to issue, say, a catastrophe bond under a Special Purpose Reinsurance Vehicle (SPRV) that it would have to sponsor under the current regulations. To a lesser extent (due to lower frequency of such cases), having the PCC option would allow for a wider choice of structures when designing a sovereign risk pool such as SEADRIF,” he continued.
Moreover, Goh also observed that there is a lot of interest for this flexible structure within Singapore, and stated that he also feels confident that there will be clear growth in the ILS space soon after the PCC regime is implemented.
“For Singapore, the demand for a PCC model will come from the captive insurance and the ILS markets, and to a lesser degree, sovereign risk pools. We’ve already seen a lot of interest from foreign players hoping to set up a vehicle in Singapore in some shape or form.
“I am confident that we will see very clear growth in the ILS sector soon after the PCC regime is implemented given the demand we see from corporates, insurers and investors for a structure beyond what a traditional company or SPRV in Singapore can offer.”
We also asked Goh to share any ILS use-cases he envisions for the PCC structure.
“The clearest use case is for potential ILS sponsors with smaller insurance portfolios for securitisation, the kind that wouldn’t justify the time, resources and cost of setting up a standalone SPRV in Singapore. A cell in a PCC lets them bring their ILS issuance to market without having to incur the significant upfront costs of sponsoring an SPRV and its continuing overheads, opening the market to a new set of potential ILS investors and issuers,” Goh told Artemis.
As well as this, Goh outlined that for ILS sponsors with smaller insurance portfolios, renting a cell for an ILS issuance can help save on costs, resources and time that would otherwise be deterrents to setting up a SPRV, making these smaller issuances viable.
In terms of how foreign players may respond to Singapore’s PCC structure, Goh noted that there has been considerable inbound interest from players hoping to establish a risk transfer vehicle in Singapore in some form.
“Singapore has already seen 34 catastrophe bond issuances since December 2018, and the PCC framework could let insurers with smaller portfolios transfer their risks to the capital markets and also entice foreign companies who would otherwise not seek to establish their own captive insurer to now seriously consider renting a cell of a PCC for their captive insurance plans,” he explained.
To conclude, Goh shared how investors have responded since the MAS made its announcement for a new PCC regime in Singapore.
“I can’t speak to investor sentiment directly since that hasn’t really been tested yet and we are at the first stage of the public consultation by the Monetary Authority of Singapore (MAS) with the aim of promulgating the PCC legislation in 2028, but in the last three weeks since the MAS made its announcement for a new PCC regime in Singapore, I have received many enquiries from clients, both locally and from overseas, so I strongly believe that when implemented, there will be a strong take-up rate and, hence, for investors, a larger pool of risks that can then come to the market via a PCC structure,” Goh concluded.
Also read: Aon sees Singapore ILS opportunity in new PCC structure: George Ong
Read all of our interviews with ILS market and reinsurance sector professionals here.
