Lim Hng Kiang: Singapore's insurance industry - investing in future
growth
Congratulatory remarks by Mr Lim Hng Kiang, Deputy Chairman of the Monetary Authority of
Singapore and Minister for Trade and Industry, at the opening of the AXA University Asia
Pacific Campus Singapore, 8 April 2009.
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Mr Henri de Castries, Chairman of AXA Management Board and CEO of AXA Group
Distinguished Guests
Ladies and Gentlemen
I am delighted to be here with you this evening to commemorate the opening of the AXA
University Asia Pacific Campus.
This establishment of a full-fledged corporate training campus here reflects AXA Group's
continued commitment to people development, in Asia and to Singapore. We welcome the
leadership and foresight demonstrated by AXA in investing in future growth of the industry.
This investment is especially significant given the current difficult economic environment.
Allow me to first comment on global economic and financial developments.
Overview of economic and financial developments in the world, including Asia
As you know, global financial markets are going through very turbulent times. The sharp
downturn in global economic activities has taken many by surprise. Some say that this
current macroeconomic condition is like the perfect storm. Sharp tightening of credit
conditions, loss of confidence in banking and capital markets and sharp declines in output
have resulted in a gloomy outlook for the global economy with projected growth of a meagre
1⁄2 percent for 2009. This is probably the lowest rate since World War II.
The global insurance industry was not spared the impact of the volatile financial markets.
While the industry has generally been fairly resilient to date, business conditions this year are
expected to be very challenging. Insurance companies not only have to manage their capital
bases in this fluctuating market, they also need to cope with lower business volumes as a
result of the recession. Forecasts are for very tempered growth in the industry this year.
However, the long term potential of the insurance sector in Asia remains promising. As such,
insurance companies should stay engaged and take this opportunity to strengthen your
operational capabilities. This will help us ride the crisis and position for the upturn. In this
respect, I would like to share two potential areas that insurance firms can focus on:
(i) Insurance industry to focus on core competencies
First, if there is one thing that this crisis has taught us, it is for us to go back to fundamentals.
The financial crisis is a timely reminder for the insurance industry to stay focused on their
core competencies and to continually improve and strengthen their risk management
systems. MAS has long emphasised the importance of sound risk management to all
financial institutions. In February 2006, MAS issued risk management guidelines to enhance
financial institutions efforts in this area. This was further supplemented by additional
guidelines issued for insurance businesses in November 2007, covering areas such as
product development, pricing, underwriting and claims handling. Although it is difficult for the
industry to be insulated from an economic downturn, there is scope for more forward-looking
evaluation and management of the risks facing the insurance industry as a whole. Rigorous
stress testing and risk mitigating strategies for the asset side of the books are examples of
areas that insurance companies should be paying particular attention to in these difficult
times.
(ii) Encouraging investments in research and talent development
Second, I would like to encourage the industry to take advantage of the current downtime to
channel resources to research and training. Companies should not lose sight of the long term
and use this opportunity to invest in trying to identify new risks, new trends and in capacity
building.
For research, this is very important. As the insurance industry in Asia develops, there is an
increasing need for better understanding of insurance risks in Asia in order to allow for more
robust risk modelling. For instance, systemic demographic shifts in Asian countries will pose
many retirement planning challenges. Just to cite a quick statistic, from the year 2000 to
2050, the old-age dependency ratio in Asia is projected to rise from 9% to 27%. There is a
need for everyone to have a better grasp of this relatively new challenge of managing
longevity risk. Many countries have been reviewing and improving their pension systems
given this trend. For the insurance industry, longevity risks for the different markets will need
to be better understood before appropriate products and services can be developed and
offered. To support such efforts, I am glad to note that our local universities have initiated
research institutes and projects in these areas. One example is the new Centre for Silver
Security under SMU's Sim Kee Boon Institute for Financial Economics. The Centre will focus
on research in retirement security issues such as retirement planning and pensions. AXA
University could thus leverage on the research community here to enhance the knowledge of
risks in our region.
The other aspect is the competency and availability of skilled professionals in the insurance
industry. Having a pool of talent with the necessary skills is critical for the industry to maintain
its competency and remain competitive. To support the specialised need of the insurance
sector, the Nanyang Technological University launched a new minor for Risk Management
and Insurance this year. We are also pleased that the General Insurance Association has
launched the Global Internship Programme in May last year to provide deserving
undergraduates with exposure to the wider insurance industry, both locally and overseas.
We believe that the current downturn is also an opportunity to invest in developing talent for
the longer term. We have, as part of a nation wide effort to encourage manpower
development, recently announced enhancements of up to 90% co-funding for training
schemes under the Financial Sector Development Fund. We want to share the risks and
costs with financial institutions in this climate to retain and develop talent. In addition, MAS
has also announced that it would set aside S$15 million to support fresh local university
graduates in industry attachments over the next 1-2 years.
Closing
As an international financial centre, Singapore needs to continually build on its fundamentals.
We have to retain and enhance trust and confidence among investors and businesses here
by continuing to provide socio-political stability, respected regulatory standards and a
wellregarded legal regime. Underpinning all these efforts is a highly skilled and professional
talent pool. AXA's decision to locate its training centre here will therefore go a long way to
support this effort. On that note, I would like to extend my heartiest congratulations once
again to the AXA Group for the launch of the AXA University Asia-Pacific Campus in
Singapore. I wish you every success in this very important endeavour.
Have a great evening, thank you.