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market relies on sustainable profitability. Singapore represents an attractive diversification prospect for global insurers and reinsurers and a good investment of capital for local and regional players. Singapore’s offshore businesses reported a total of about S$26 billion in earned premiums over the decade between 2004 and 2013, while accumulated underwriting losses were S$3.6 billion (see Table 6). This resulted in a combined ratio of about 114% over the period, which indicated underwriting losses for that business. However, if we exclude the extraordinary losses of 2011, the average combined ratio for the past decade was 87%.


The 10-year aggregate underwriting loss result for Singapore’s offshore insurance business may raise some questions about whether the reinsurance business in the region is profitable. While unprecedented events are inevitable, we believe reinsurers will adapt to new information by increasing the sophistication of current models used to assess risk exposures. We expect the major players to have a long-term perspective and aim to ride over insurance cycles. Opportunistic players that rush to deploy capital in the region could be more susceptible to short-term forces and could choose to exit the market when they face difficulties. Singaporean insurers and reinsurers underwriting offshore business have been profitable in most years, except 2011, when extraordinarily high annual losses accrued from the Thai flood, Japan tsunami, and flooding and earthquakes in other regions (see Charts 7 and 8).


The catastrophic events in 2011 highlighted the importance of a risk management culture which looks beyond quantitative models as well as the need for updated model specifications to ensure companies can use new information to assess risk exposures. The introduction of catastrophe event limits on reinsurance treaties, increasing use of quantitative models, and improving data quality have significantly reduced the likelihood of a recurrence of losses similar to the 2011 Thailand flood.


However, experience and modelling alone cannot completely prepare the industry for exceptional natural catastrophe events. No model can predict every source of loss following a natural catastrophe event. Insurers and reinsurers have to understand the limitations of each model to set appropriate risk limits and margins in


Global Reinsurance Highlights 2014


Table 3: Net Reinsurance Premium Written 2000


Country Germany U.S.


Bermuda U.K.


Switzerland Japan


Ireland France


Luxembourg Korea Others Total


28.7 6.1


25.23 26.8 5.70 6.45 7.91 4.97 2.05 4.68 0.27 0.98 8.87


94.12 Source: Global Reinsurance Highlights


Total gross premium (S$ mil.) 5-year total growth (2008–2013)


Table 4: Singapore Offshore Insurance Funds’ Premium Breakdown (2013) Cargo 367.1


Hull and liability


91% 5-year compounded annual growth rate 13.8%


Chart 4: Singapore Insurance Market Gross Premium SIF


OIF excl. captives (S$ Mil)


2,000 4,000 6,000 8,000 10,000 12,000


0


2000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-1Q Source: Monetary Authority of Singapore. OIF=Offshore Insurance Fund. SIF = Singapore Insurance Fund


© Standard & Poor's 2014.


849.6 86%


13.2% Property


3,852.9 111%


16.1%


2012


NRPW (US$ bil.) (%) NRPW (US$ bil.) 27.01


(%) Annualized growth (%)


6.9 8.4 5.3 2.2 5.0 0.3 1.0 9.4


54.60 30.5 6.0 32.98 18.4 2.3 14.70 8.2 8.2 7.7 6.5 6.7 3.6 5.7 6.1


13.73 12.09 10.16


8.01 4.5 12.0 7.47 4.2 4.0 4.1 31.5


7.29


3.39 1.9 10.9 14.81 8.3 4.4


179.22


Casualty and others


1,076.1 67%


10.8%


YoY Growth % - OIF excl. captives


YoY Growth % - Total market


(%)


10 15 20 25


-5 0 5


45


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