10 Today, let me focus on the first strategy of developing Singapore’s alternative risk transfer market through insurance-linked securities and public-private partnerships. Insurance-linked securities (ILS) 11 Let me begin with insurance-linked securities, or ILS. 12 We know that alternative capital has been growing more rapidly than traditional capacity over the years, a clear demonstration of greater acceptance of ILS instruments by both investors and issuers. In particular, issuance of catastrophe bonds have grown strongly and total catastrophe bonds outstanding reached a new high of almost USD 30 billion as at the third quarter of this year. This is despite the persistent reinsurance headwinds of excess capacity and depressed rates. 13 Catastrophe bonds present unique benefits to reinsurers: they provide multi-year capacity and pricing certainty; they are more secure due to their fully collateralised nature and ability to be rated; they are a good alternative to traditional reinsurance for risks that are hard to model; and they are capital-efficient. 14 To an investor, catastrophe bonds proffer strong benefits too: their low correlation with the 2/4  BIS central bankers' speeches  financial markets make them an effective asset diversification instrument; they have low volatility and stable returns; they provide liquidity; and they can be issued via private placements or as tradable securities. 15 We are therefore seeing a growing cluster of institutional investors and fund managers like Quantedge exploring allocation into catastrophe bonds, as they venture into niche and specialised strategies to extract better risk-adjusted returns.

The non-performing loan ratio has continued its downward trend despite the supply and demand shocks caused by the pandemic and the inflationary pressures and stands at 11,2 percent as at June 2022, with total non-performing loans amounting to € which is the lowest level observed since 2014 when the definition was harmonised across European Union. This significant asset side de-risking is attributed to both organic solutions such as restructurings as well as non organic through securitisations and sales. Therefore a large portion of the NPL reduction still remains in the economy through the credit acquiring companies. Indeed, the total amount of NPLs currently managed by these entities amount to € which is more than six times larger than the € NPL volume in banks' balance sheets. It must be pointed out though that the derisking process and progress has not been homogeneous across the system with the smaller Banks lacking significantly behind. Therefore, the close monitoring of asset quality enhancement of less significant institutions is high on our supervisory agenda The Central Bank of Cyprus, acted decisively in this regard by urging both the Banks and credit acquiring companies to proceed with viable restructurings with cooperative troubled borrowers, in line with the related directives and guidelines. In particular, since the expiry of the initial moratorium period (i.e. freezing of bank loan instalments) in December 2020, restructuring activity within 2021 increased significantly (by 251,5 percent) to € compared to € in 2020, indicating the effort made by banks to help distressed borrowers settle their obligations.