MAS to encourage livelier capital markets for alternative risk financing, strengthening Singapore’s insurance hub status
The central bank will extend its support to cover non-Apac risks and renewable energy products, while continuing to prioritise solutions that address the region’s needs
[SINGAPORE] The Monetary Authority of Singapore (MAS) has refreshed its insurance-linked security (ILS) grant scheme to offset issuance costs, encourage broader market participation and innovation, and support the growing demand for risk transfer solutions, particularly in Asia.
The central bank will also work with the industry to attract and catalyse demand for ILSs in Singapore, MAS managing director Chia Der Jiun said at the 21st Singapore International Reinsurance Conference (SIRC) organised by the Singapore Reinsurers’ Association (SRA) on Monday (Nov 3).
ILSs provide an alternative risk financing solution that allows risk carriers to transfer their peak portfolio risks to capital market investors. They consist of catastrophe bonds, collateralised reinsurance instruments and other forms of risk-linked securitisation.
“We welcome sponsors and asset managers and owners that are key to establish ILS structuring, or investment teams here, to engage MAS directly,” said Chia.
He added that MAS will extend its support to cover non-Asia-Pacific risks and renewable energy projects, while continuing to prioritise insurance solutions that address protection needs within the region.
To this end, it has continued to evolve the ILS grant scheme, which was launched in 2018 to encourage the issuance of such instruments in Singapore.
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The scheme was enhanced in 2023, enabling cedants to issue a broader range of ILS instruments, including sidecars and collateralised reinsurance arrangements.
However, Chia noted that the ILS market in Asia remains nascent, with modest penetration, limited issuance, and slower adoption by insurers and investors.
Nevertheless, he sees ILSs increasingly being used to allow market participants to share the risk of insurance. For instance, MAS has supported the issuance of 29 catastrophe bonds to date, covering disasters such as storms, earthquakes and floods, both in the region and globally.
SRA chair Kenrick Law highlighted that Singapore is advancing ILS to “unlock new sources of risk capital and strengthen global resilience”.
Beyond Singapore, he also sees regional innovation in parametric and health reinsurance, as well as artificial intelligence (AI)-powered underwriting and digital risk modelling, all of which enhance efficiency and close protection gaps.
As financial markets in the region continue to grow, Chia sees the investor base for ILSs broadening. He said that they offer attractive, stable returns that are typically uncorrelated with other asset classes, making them a compelling option for institutional investors seeking to diversify their portfolios.
“With climate risk growing globally, including in Asia, we expect continued momentum in the growth of ILS alongside reinsurance capacity in our region, as more countries and businesses seek greater protection from catastrophic risk,” Chia added.
Law also highlighted the emergence of ILS hubs in both Singapore and Hong Kong. However, he stressed that collaboration is essential to fully realise the region’s potential. “Our success will depend on how effectively we reinsurers, insurers, brokers, policymakers and capital providers can work together to build a stronger and more connected Asia risk ecosystem,” he noted.
Growing market
Chia pointed out that Singapore’s insurance market has evolved alongside the region’s growing protection needs.
From 2019 to 2024, the industry experienced robust growth, employing approximately 19,000 individuals. Total premiums from life insurance, general insurance, and reinsurance grew by an average of over 8 per cent annually, reaching about S$78 billion by the end of last year.
“Insurers are growing their headquarters or regional functions in Singapore, driven by structural and strategic considerations,” said Chia.
He added that speciality insurance lines and reinsurance capacity are expanding to cover large and complex risks within the region. Global brokers are also establishing capabilities in analytics, risk modelling and sustainability in Singapore.
In line with this, MAS will collaborate with the industry to exchange views and co-develop new risk solutions for the region across three specific areas: harnessing AI and data; infrastructure financing opportunities in the region; and climate risk coverage.
“Insurance holds significant investment capacity and the long duration of infrastructure investments match well with the longer-term liabilities of life insurance,” said Chia.
He revealed that MAS will launch a pilot infrastructure financing programme in January 2026, allowing insurers to invest in nonqualified sustainable infrastructure with reduced capital charges.
Asset managers such as BlackRock, Brookfield, Clifford Capital and Macquarie Asset Management have expressed interest in the initiative.
Chia welcomed other asset managers and insurers in the Republic to partner MAS on the pilot and provide feedback, adding that further details will be shared in due course.
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