Singapore’s insurers at risk from rapidly rising catastrophe exposure: report

Property premiums could rise in the near future.

Local insurers are at risk from their rapidly rising catastrophe exposure, and a combination of outdated catastrophe models, insufficiently modeled risks, increasing capacity and competition, and weakening underwriting standards could result in significant losses.

Offshore gross insurance premiums in Singapore have quadrupled over the past 13 years. This is thanks to the country's conducive business and regulatory environment for insurance and reinsurance business, according to Standard & Poor's Ratings Services in a report published today titled, "Singapore's Push To Expand Insurance Hub Hinges On Sophistication And Expertise."

Strong economic growth in Asia-Pacific and the corresponding rise in insurable asset values have spurred Singapore's insurance industry forward. However, the growth in insured assets has also rapidly increased catastrophe exposure for insurers.

According to Standard & Poor's credit analyst Philip Chung, "We expect economic growth in Asia-Pacific to continue to fuel regional insurance demand and development of the industry in Singapore. As a result, specialty, property and property catastrophe premiums are likely to rise in the next few years. We believe premium volumes will grow in property and catastrophe risks and specialty lines in Singapore's offshore insurance hub as the country enhances its tax exemption scheme for offshore insurance businesses."

A more sophisticated and developed Singapore insurance industry will help boost penetration in the region, provide profitable growth and diversification for insurers and reinsurers. It will also reinforce the relevance of the reinsurance industry. At the same time, it will support the industrialization of the emerging economies in the high-growth region.