Insurers enjoy cost savings and policyholders get faster pay-outs Asia Risk Transfer Solutions, or ARTS, is a local start-up co-founded by NTU graduate Alex Chen and Professor Haresh Shah, that has done this well. It has developed a risk analytics platform for the design, pricing and management of index based insurance products. ARTS’ flagship crop platform in India has reduced the time taken for underwriters to 2/4  BIS central bankers' speeches  calculate agriculture insurance premiums, from days to a matter of hours. ARTS’ solution is being used to provide index-based agriculture insurance products to millions of farmers across the country. We are also seeing increasing use of alternative risk transfer mechanisms, such as insurancelinked securities (or ILS) in disaster risk management. Catastrophe bonds, the most common form of ILS, enable insurers and reinsurers to transfer some of their risks to the capital markets. If no catastrophe occurs, the insurance company pays a coupon to the investors in these bonds. If a catastrophe occurs, the principal is forgiven and the money is paid to those who bought the catastrophe insurance. Japan has actively tapped on ILS to diversify the insurance industry’s exposure to natural perils. Research and development Third, research and development. Singapore has made good progress in fostering a natural catastrophe research ecosystem. Since its launch in 2010, ICRM has emerged as Asia’s leading research institute in catastrophe risk.

Besides leading Nat Cat DAX, ICRM has been involved in 16 core research projects – such as conducting seismic analysis for Sumatra and flood risk assessment for Jakarta. A number of other local and global initiatives aimed at building disaster risk resilience is being undertaken in Singapore: Recently, the industry, led by Lloyds, signed a Natural Catastrophe Statement of Intent with MAS and UK Trade and Investment to promote the development of natural catastrophe insurance in regional markets. As part of the SOI, eight Lloyds Syndicates have committed $ million in natural catastrophe capacity in emerging markets, including Asia. An integrated ASEAN market Fourth, improving market access. ASEAN countries are working together to open up insurance market access within ASEAN, enabling greater risk diversification beyond national boundaries. Diversification is critical to building resilience. Last year, ASEAN member states made a commitment to liberalise by 2025 the crossborder supply of international Maritime, Aviation and Goods-in-Transit or MAT insurance, catastrophe reinsurance and remaining classes of reinsurance. The majority of ASEAN member states have already committed to liberalise MAT insurance; and are aiming to substantially liberalise catastrophe reinsurance by 2019. Conclusion Insuring Asia against natural catastrophe is a most worthwhile endeavour. The growth and prosperity that Asia has achieved over the last three to four decades can potentially be set back by the economic and social disruptions that natural disasters unleash on a periodic basis. We must put in place mechanisms for the effective assessment, management, and transfer of 3/4  BIS central bankers' speeches  disaster risks.