Postcard from Singapore

Greetings from 1º 22’ 0” N / 103º 48’ 0” E!

For the closet cartographers out there, you will know I am referring to Singapore, or Singapura – the Lion City.

Personally, I like to refer to Singapore as the Garden City as there are some truly spectacular gardens and nature reserves on the island, with the most well-known being Gardens By The Bay. Situated 1 degree north of the equator, we are well and truly in the monsoon belt and this brings some stifling humidity and heat, along with some of the biggest and best thunderstorms you will see anywhere in the world.

For such a small island city (around 720 km2) there is so much to see and do here for all ages. Theme parks on Sentosa Island, the renowned Singapore Zoo, the Garden Domes, Orchard road shopping, The Singapore Flyer…the list goes on. For me, I enjoy going to the local markets where you can bargain for an incredible variety of food. Eating is one of the national pastimes here, and there is no shortage of options – from the cheap (but very tasty) hawker centres, to fine dining venues. The ability to quickly jump to neighbouring countries for a long weekend, or a longer break, is one of the bigger appeals, for locals and expats alike.

I moved to Singapore over 12 months ago to work with one of the fastest growing demographics in the Asian market – High Net Worth (HNW). HNW is difficult to define as there is no formal definition, however the most accepted understanding of a HNW individual is one who earns over US$ 1 million per annum, and has investible in excess of US$ 5 million. Ultra HNW individuals generally have in excess of US$ 30 million in overall net worth. Capgemini, in their 2017 Asia Pacific Wealth Report, indicated that by 2025 the overall wealth held by HNW individuals in the Asia Pacific region will likely surpass US$ 40 trillion by 2025. The graph below, also from Capgemini, will give you some sense of where these HNW individuals are, and which markets are seeing the largest growth:

Asia-Pacific HNWI Population, 2010-2016, by Market

HNW life business in Asia is largely built on traditional products (Whole of Life, Universal Life and Variable Universal Life) for very large sums insured – up to US$ 200 million, although the vast majority of HNW business will have a sum insured well within US$ 10 million. There is little interest in any other typical insurance products or riders we would see in the Australasian market (Critical Illness, TPD, Income Protection, etc).

So why would ultra-HNW individuals need such large amounts of insurance? Well, we need to forget the insurance basis – insurance is not the driver for these products – the capital return on the investment component is the key attraction. Most of these products are single premium – very large amounts of money paid upfront – with the majority of this lump sum premium financed by a private bank, who offer these products as part of an overall wealth diversification portfolio plan for their client. The cost of this premium finance is lower than the rate of return provided by the insurers (most will offer a guaranteed return for a number of years). It is this interest arbitrage which makes these products an attractive part of the overall HNW wealth portfolio. The lump sum payable on death also provides some liquidity to the estate where the majority of assets are illiquid.

The underwriting of this business does require a much different outlook than what you would expect in the Australasian market. Firstly, this is mortality business only, so the technical challenges of disability and critical illness products are less evident.

Secondly, speed is of the essence. Most of this business is managed via international brokers who specialise in HNW, and they will often send the same application to many insurers – those that respond in the quickest time frame, and with the best offer will win the business. Insurers and reinsurers who are slow to respond, offer less competitive terms on each risk feature or who want too much additional information will be quickly dropped from consideration, leaving the fastest and most competitive company to win the business – always assuming they have adequate capacity. This places considerable pressure on underwriters to provide very competitive terms.

Finally, the financial risk profiling is delicate, to say the least. HNW individuals are very reluctant to provide evidence of both income and overall wealth. Often, wealth will be difficult to quantify as it is largely locked up in the family business, grown over many generations. Underwriters need to delicately balance the need to justify such large amounts of cover, with the understanding that overall wealth and income may need to be built on third-party information, plus some opaque proofs via internet based research.  It is also important to have a robust understanding of how the overall wealth was generated, as HNW products can be very appealing to those who are keen to launder money earned by less routine means!

So, turning to 2018 and beyond, what does the future hold for HNW insurers? The growth in this market over the past 4 to 5 years has been considerable, and cheap financing has had a part to play in the success story. The future growth of HNW products in this market will rely on several factors, including political and economic stability, understanding and managing regulatory reform and ability to provide product solutions for smaller and emerging markets in the region. The capability to innovate with market disrupters will be key to attracting the next generation of HNW individuals, given their appetite to be more open to volatile investment strategies. Interesting times ahead in a region which is experiencing substantial growth and strong opportunities for both insurers and reinsurers.


Andrew McPherson has been with Munich Re since 2015 and joined the Asia- Pacific operation in early 2017 as Senior Underwriting Manager, High Net Worth. Currently based in Singapore, Andrew has over 30 years of experience in the Australasian insurance industry and was Chief Underwriter for AIA Australia prior to joining Munich Re.