New capital The second opportunity is in new capital. New or alternative capital continues to increase its share in the global reinsurance industry, as alternative risk transfer solutions in the form of insurance-linked securities (ILS) such as catastrophe bonds, collateralised reinsurance and sidecars, among others, gain acceptance. Alternative capital grew 6% in the first half of 2015 to $ billion, while traditional capacity fell by 3% to $ billion. While the influx of alternative capital may have led to excess capacity, softening rates and narrowing of profit margins, this same capital has the potential to unlock opportunities for insurers to access new products and markets. As I mentioned earlier, Asia, in particular, is especially attractive to insurers and reinsurers:  BIS central bankers’ speeches  3  •  Alternative capital, when deployed to markets in need of risk capital for protection against losses, will allow insurers and reinsurers to underwrite more risks and better serve society’s needs. •  As countries in Asia look to strengthen resilience to potentially debilitating events like catastrophes, it is not unexpected that alternative risk transfer mechanisms, such as catastrophe bonds and government pools, will increasingly feature as regional insurers leverage alternative sources of risk capital to complement traditional reinsurance. The management of catastrophe risks in Asia-Pacific is a priority for insurance players as well as governments in the region. A research by Lloyd’s has shown that a 1% rise in insurance penetration translates to a 22% reduction in taxpayers’ contribution following a disaster.
Jacqueline Loh: Managing risks in an uncertain world Keynote address by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of Singapore, at the 13th Singapore International Reinsurance Conference, Singapore, 3 November 2015. *  *  *  Opening Distinguished guests, ladies and gentlemen, good morning. It is my pleasure to join you today at the 13th Singapore International Reinsurance Conference. I believe the theme of this year’s conference, “Managing Risks in an Uncertain World”, is one which will resonate with many of you, as insurers, reinsurers and brokers alike navigate the crosscurrents in the reinsurance industry, in search of profitable growth and better returns. In keeping with the conference theme, I would like to share a few observations on how the Singapore insurance industry can capitalise on the opportunities created by new risks, new client segments, and new markets in Asia. Too much capital finding too little risks Those of you who attended the recent Monte Carlo Rendezvous would have discussed extensively the challenging conditions in the current reinsurance market, which some have warned would be the “new reality”, or the “new normal”. We have seen how structural responses – winning market share from competitors, and bulking up through acquisition of rivals – are largely built on a zero sum game. This becomes a problem when the pie is not growing, as could be the case if the industry does not innovate and create uncontested space.