In light of global trade wars and regional circumstances, Minister for Finance Mr Heng Swee Keat reinforced the need for resilience at the 15th Singapore International Reinsurance Conference. Insurance has a great role to play in bolstering against preventable attacks or unexpected disasters, boosting the rate of recovery.
The Singapore Government is working with the insurance industry to address the risks ASEAN faces. Minister of Finance, Mr Heng Swee Keat said, “ASEAN is vulnerable to both traditional natural catastrophe risks and modern cyber risks. Within ASEAN, there is scope for better risk pooling, for insurance to play a greater role in mitigating the financial shocks of unexpected disasters or deliberate cyber-attacks.”
He was speaking at the 15th Singapore International Reinsurance Conference yesterday. He highlighted two key areas where insurance can play, namely, natural disasters and cyber threats. Insurance builds resilience, which plays an important role in sustaining growth and protecting the well-being of ASEAN’s population.
Between 1980 to 2016, the region suffered losses of USD 150 billion from natural disasters. However, only 10-20% were insured, compared to more developed regions which had typical coverage of 40%.
As the region becomes more developed, more monies needs to be invested into disaster resilience so that ASEAN is not hindered in its economic and social progress any longer.
One of the areas which will strengthen disaster risk resilience in the region is the endorsement of Phase 2 of the ASEAN Disaster Risk Financing and Insurance initiative (ADRFI). There is a total of three areas which were collectively deliberated by ASEAN member states.
ADRFI’s first phase has been completed. The aim was to produce a low-resolution historical database of select ASEAN countries prone to earthquake and typhoon events. Moving on to Phase 2, the 2016 initiated ADRFI will focus on three areas. The first is to improve data required for assessing disaster risk exposure and financing solutions. ADRFI will also enhance its knowledge on disaster financing solutions through capacity building. Thirdly, risk advisory expertise will be harnessed to provide advice and design innovative risk financing solutions.
Coupled, the data-driven tools will improve the robustness of data standards and models. Eventually, a pipeline of risk financing solutions can be deployed in ASEAN and Asia as a whole.
Minister Heng said, “With good data, policymakers and regulators can make better decisions on different disaster risk management strategies and risk financing tools. Capacity building efforts under ADRFI will also equip ASEAN member states with practical tools and knowledge on disaster risk financing solutions.”
Insuring Cyber Attacks
The second area of concern is cyber resilience.
Citing the doubled cost of cybercrime worldwide in 2021 from approximately USD 3 trillion in 2015, the Minister underscored the pervasive of cyber threats. Of concern is Asia’s increased risk of becoming the largest targeted area for cyberattacks. He said hackers are 80% more likely to target organisations in this part of the world, yet Asian organisations take 1.7 times longer than the global average to discover these cyber breaches. What’s worse, more than 60% of Asian companies lack proper cyber threat monitoring systems.
Investing in cybersecurity will become important in time to come as threats become more malicious and pervasive. Through risk pooling, governments can mitigate the consequences of cyberattacks.
“On the insurance front, insurance coverage of cyber risks remains very low globally, due to a lack of historical data and intelligence to support risk assessment, underwriting and pricing. As a result, most policies have too many exclusions,” commented Mr Heng.
Singapore has already made commitments in insuring against cyber risks. In 2016, the Republic launched the Cyber Risk Management Project, which aims to provide a cyber-risk assessment framework to support robust underwriting and pricing of cyber risks. Through the project, several milestones have been accomplished. First, a standardised taxonomy of cyber incidents has been developed. A cyber-event loss database has also been created. Finally, there is benchmarking of cyber loss models to support actuarial pricing.
The world’s first commercial cyber risk pool in Singapore was also announced by the Minister. It is a collaboration between Singapore Reinsurers’ Association and Peter Hacker. The pool will commit up to USD 1 billion in capacity, bringing together both traditional insurance and insurance-linked securities markets to provide bespoke cyber coverage. The pool allows participants from ASEAN and Asia to be protected against cyber-related losses. Currently, twenty insurance firms have expressed interest in participating in the pool.
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