The Southeast Asia Disaster Risk Insurance Facility (SEADRIF) will be established in Singapore later this year, deputy prime minister and minister for finance Heng Swee Keat has said.
SEADRIF is a facility for ASEAN countries to access immediate financing in the aftermath of a natural disaster. This will further strengthen their financial resilience to climate risks. Singapore’s contributions to SEADRIF are among the ways the republic seeks to boost Asia’s sustainable growth, Mr Heng said.
Delivering the keynote speech at the Global Public Investor Launch on 12 June organised by the Official Monetary and Financial Institutions Forum (OMFIF), he named three main channels through which Singapore is seeking to contribute to Asia’s sustainable growth:
- First, the Infrastructure Asia initiative by Singapore can be a conduit for institutions to invest in infrastructure development opportunities in Asia.
Mr Heng said that only about 10% of infrastructure in the region are readily bankable, and an estimated 30% could become bankable with some added support. Infrastructure Asia aims to build up both the supply of and demand for bankable infrastructure projects in the region.
It builds partnerships amongst industry players, multilateral development banks and the public sector, with the aim of helping governments better structure, finance and implement infrastructure projects in Asia.
- Second, Singapore is growing its sustainable finance sector to promote sustainable economic growth in the region.
The Monetary Authority of Singapore (MAS) is seeking to nurture the growth of green, social and sustainability bonds. To this end, the MAS introduced a Green Bond Grant scheme in 2017, which was expanded to include social and sustainability bonds this year. So far, over S$6bn ($4.4bn) worth of green bonds have been issued in Singapore.
- Currently, only about 5% of the economic losses are insured in developing Asia. The MAS is currently developing the market for insurance-linked securities (ILS) as an alternative risk financing solution, to address protection gaps, diversify the costs of natural catastrophe events and alleviate the fiscal burden on governments.
The MAS has set up the Natural Catastrophe Data Analytics Exchange (NatCatDAX) to support the structuring, modelling and securitisation of ILS transactions through improving data quality and promoting standardisation.
The MAS has also introduced an ILS grant scheme to defray the costs associated with issuing a catastrophe bond in Singapore. Mr Heng mentioned that the first catastrophe bond was issued out of Singapore earlier this year. Insurance Australia Group sponsored this first catastrophe bond to be issued in Singapore.
Mr Heng said that Asia will face many of the challenges, as well as the opportunities, of sustainable development in the coming years. Asian economies’ share of global GDP is projected to double from 26% in 2000 to 50% by 2050. The estimated financing needs to support the ‘greening’ of Asian economies are substantial. China alone has estimated that it would require $450-600bn of investment annually to achieve its green policy goals under the 13th five-year plan. Closer to home, it is estimated that ASEAN will need US$200 billion in green investment annually till 2030.
Within Asia, the UN Economic and Social Commission for Asia and the Pacific predicts that economic losses from natural disasters and weather catastrophes will reach $160bn per year by 2030. A