Singapore Public Disclosure
Berkley Insurance Company – Singapore Branch (BIC SG) is a branch of the US based Berkley Insurance Company (BIC US) which in turn is a fully owned subsidiary of W. R. Berkley Corporation (WRBC). The registered address of BIC SG is 18 Cross Street, #09-02 Cross Street Exchange, Singapore 048423.
Founded in 1967, WRBC is a property and casualty insurance holding company based in Greenwich, Connecticut, USA. It is listed on the New York Stock Exchange under the symbol “WRB” and is a Fortune 500 company. WRBC’s insurance subsidiaries have AM Best and Standard & Poor’s ratings. BIC US has an AM Best rating of A+ (Superior) and a Standard & Poor’s rating of A+ (Strong). For the most updated rating information, please see https://ir.berkley.com/financials/Ratings/default.aspx.
BIC US is a Delaware corporation licensed to write insurance and reinsurance business and is regulated by the Delaware Department of Insurance. BIC US is directly owned by Star Signet Holdings Inc., a Delaware holding company that is 100% owned by WRBC.
Nature of Business
BIC SG is licensed by the Monetary Authority of Singapore (MAS) under the Insurance Act to carry on general insurance business in Singapore. The general insurance licence was issued by the MAS with effect from 1st July 2016.
Prior to the 2016 licence being granted, BIC SG was only licensed to carry on general reinsurance business in Singapore with its initial licence that was issued in December 2010.
BIC SG pursues a strategy of a niche property and casualty reinsurer focusing on excess of loss and select proportional business for casualty facultative and treaty business. Under the general insurance licence, BIC SG also offers Financial Lines, Marine and Casualty insurance and facultative reinsurance products to selected markets.
Objectives & Strategies
BIC SG’s marketing focus is premised on:
- Promoting the solid financial rating and balance sheet strength of BIC US.
- Promoting the local decision-making capabilities and its proximity to local clients and markets.
- Promoting long-term profitable relationships with BIC SG’s distribution sources.
- Offering an experienced team of industry professionals with extensive knowledge of the market and the region.
The reinsurance business strategy (operating under the trading name of Berkley Re) is based on:
- Offering Casualty & Property Treaty reinsurance, Casualty Facultative & Casualty Facility reinsurance
- Writing business on an excess of loss and proportional basis
- With a distinct focus on specialty niche business, more than just providing reinsurance capacity to our customers, assisting insurers in entering new classes of business or in developing new products to the market.
- Being part of WRBC, we are able to leverage the expertise of the global network within the group.
Products offered include:
- Casualty Treaty – General Liability (Public & Products Liability), Contract Works Liability, Professional Indemnity, Motor Vehicle Liability, Umbrella Liability, Directors & Officers Liability, Employment Practices Liability, Personal Accident
- Property Treaty – Fire & Allied Perils, Property All Risks, Constructions All Risks, Erection All Risks, Erection All Risks Machinery, Risk and/or Catastrophe Excess of Loss, Natural Catastrophe
- Casualty Facultative – General Liability (Public & Products Liability), Contract Works Liability, Professional Indemnity, Motor Vehicle Liability, Umbrella Liability, Medical Malpractice, Employment Practices Liability, Personal Accident
The direct insurance business strategy (operating under the trading name of Berkley Insurance Asia) is based on:
- Offering insurance and facultative reinsurance products, including Financial Lines, Marine and Casualty.
- Providing high quality service and product offerings to match market needs.
- Providing a broad product offering by leveraging the WRBC Group’s strength of a wide product offering through its various operating units.
Targeted insurance products of Berkley Insurance Asia include:
- Financial Lines – Directors & Officers, Professional Indemnity, Crime, Cyber, Financial Institutions Bond Cover and Initial Public Offering
- Marine – Cargo, Specie, Marine Liability and Hull
- Casualty – General Liability, Life Science, Clinical Trials, Exports Product Liability and Manufacturer’s E&O
The operations of BIC SG are subject to the regulatory requirements within the jurisdictions in which it operates. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions, such as capital adequacy requirements, to minimise the risk of default and insolvency on the part of insurance companies to meet unforeseen liabilities as they arise.
BIC SG is subject to regulatory supervision by the Monetary Authority of Singapore.
In terms of risk governance, BIC SG is part of an Asia Pacific Risk and Governance structure. This includes the BIC Asia Pacific Region Risk Management Strategy (RMS) and Risk Management Framework (RMF) that is in place for identifying and managing risks faced by the business in the course of its operations. The RMS and RMF outline the processes and results of the implementation of the risk and control framework.
The risk governance framework is based on the “Three Lines of Defence” model. This facilitates and encourages risk identification at all levels within the Company:
- First Line – the business operations
- Second Line – the oversight functions
- Third Line – the independent assurance functions.
The Chief Executive Officers in Australia and in Asia are responsible and accountable to BIC US for the implementation and execution of the RMS and RMF across the Asia Pacific region.
The BIC Asia Pacific Region’s (BIC APAC) governance process is overseen by five governance committees: Risk and Compliance, Retrocession / Reinsurance, Underwriting (one each for Insurance and Reinsurance operations) and Investments which provide a robust and common governance framework. Each Committee has their own Charter and meet at least four times a year (except the Retrocession / Reinsurance Committee that meets at least twice a year).
Risk and Compliance Committee
The purpose of the Risk and Compliance Committee is to assist BIC US in discharging its responsibility to exercise due care, skill and diligence regarding:
- Approval of the Risk Appetite Statement and monitoring that BIC APAC is operating within its risk appetite.
- Effective oversight of strategy and any significant items or decisions to be made that may impact required capital.
- Effective oversight of capital strength and requirements.
- Effective oversight of material risks to which BIC APAC is exposed and to oversee the risk management and control systems for both adequacy and effectiveness.
- Monitoring compliance with the RMS, Reinsurance Management Strategy and other governance, risk and compliance policies identified in the RMS.
- Effective operation and oversight of compliance with applicable laws, regulations, codes and policies across BIC APAC.
- Effective oversight of the risk management, governance and compliance frameworks.
Retrocession / Reinsurance Committee
The purpose of the Retrocession / Reinsurance Committee is to assist BIC US in discharging its responsibility to exercise due care, skill and diligence regarding the nature, extent, suitability and security of the retrocession / reinsurance arrangements supporting the operations of BIC SG and the controls relating to those arrangements.
Insurance and Reinsurance Underwriting Committees
Two distinct Underwriting Committees have been established in order to maintain a “Chinese Wall” between the Reinsurance and Insurance operations. This segregation is vital to ensure that BIC SG’s client information is not inappropriately shared between the two operations – either expressly or implied.
The purpose of the Reinsurance / Insurance Underwriting Committee is to assist the Board of BIC US in discharging its responsibility to exercise due care, skill and diligence regarding the nature and extent of the underwriting exposures of BIC SG and the controls relating to those exposures.
The Reinsurance Underwriting Committee will discharge its obligations in relation to the reinsurance operations of BIC and represents Berkley Re Australia, Berkley Re Singapore, Berkley Re Hong Kong and Berkley Re Labuan businesses. The Insurance Underwriting Committee will discharge its obligations in relation to the direct insurance operations of BIC and represents Berkley Insurance Australia and Berkley Insurance Asia (Singapore, Hong Kong and Labuan) businesses.
The purpose of the Investment Committee is to assist BIC US in discharging its responsibilities to exercise due care, skill and diligence in overseeing the investment activities of BIC SG. This oversight includes a review of:
- Investment Strategy;
- Investment Risk Management;
- Asset / Liability Management; and
- Investment exposures across asset classes and counterparties.
While it is acknowledged that risks must be taken in order to generate returns, risks taken without employing adequate controls expose the business to greater potential losses than can be tolerated. Subject matter experts across the business have designed processes, procedures, systems and actions in place which assist BIC SG in managing undesirable risk exposures. These processes, procedures, systems and actions / activities are considered BIC SG’s control infrastructure and support the desired high level risk culture.
The following are examples of key controls at BIC SG which are reviewed, monitored and tested for design and operating effectiveness at frequent intervals by the Asia Pacific Risk and Compliance team.
- Issued delegated authorities which are subject to annual review and independently tested in line with Sarbanes Oxley (SOX) control testing campaigns for efficiency and effectiveness.
Peer Reviews / File Audits
- Claim files subject to monthly peer reviews selected on a sample basis. This process is independently tested in line with SOX control testing campaigns for efficiency and effectiveness.
- Underwriting peer reviews (“4 eye” review) applied to both the insurance and reinsurance underwriting process for all new and renewal contracts.
- Underwriting file audits completed quarterly based on an independently selected sample of policies incepting or renewing in the quarter. This process is independently tested in line with SOX control testing campaigns for efficiency and effectiveness.
Guidelines, Policies and Procedures
- Policies and procedures are in place for all key business functions and are subject to annual review. The design and operating effectiveness of key policies and procedures are reviewed at least annually.
Financial and Actuarial Key Controls Testing
- Key financial processes are tested for design and operating efficiency and effectiveness in line with SOX controls testing campaigns. Examples of key controls tested include, but are not limited to, the following:
- Payments and expense approvals within delegated authority and existence of appropriate supporting documentation.
- Account reconciliations completed and reviewed by management in a timely manner.
- Appropriate segregation of duties to eliminate or mitigate fraud.
- Quarterly actuarial peer review process.
BIC SG has approved a risk capacity that is to be utilised to achieve its objectives and goals. The risk appetite is the aggregation of individual risk capacity subject to any overlaying of catastrophe modelling and reinsurance coverage applicable to the risks to reduce this aggregation.
BIC SG has a conservative risk appetite and it maintains prudent levels of capital and liquidity and generally does not engage in business activities that include high risk activities.
BIC SG underwrites a subset of individual risks of WRBC that are laid out in the annual business plan. This subset of risks is monitored separately by BIC APAC management, and also provided to WRBC for inclusion in the monitoring of the Group risk appetite.
BIC SG’s risk appetite statement establishes a common understanding between BIC APAC management and the views and expectations of WRBC regarding desirable risks underlying the execution of BIC SG’s strategy. The expression of risk appetite enables BIC APAC management to establish appropriate limits on risk-taking activities at BIC SG.
Certain risk measures and tolerances have been developed and are monitored on a regular basis via the Risk & Compliance Committee. Risk measures and tolerances have been established for:
- Insurance Risk
- Reserving Risk
- Asset Risk
- Credit Risk
- Asset / Liability Duration Mismatch Risk
- Operational Risk
- Reputational Risk
BIC SG’s objective, as stated in the Investment Policy, is to maintain an investment portfolio with assets having weighted average durations that are matched to the duration and cash flow profile of our insurance liabilities, to the extent practicable. However, as is currently necessary, BIC SG’s investment portfolio will be managed to cater for ongoing liquidity requirements whilst still achieving suitable capital coverage positions.
Capital Management Strategy
The BIC SG Capital Management Strategy is to ensure that there is sufficient capital to provide a buffer to absorb unanticipated losses while still continuing to meet its insurance obligations. In practical terms, BIC SG targets a Capital Adequacy Ratio (CAR) of between 160% and 200%.
In addition to the target range of capital adequacy which BIC SG seeks to operate within under normal circumstances, senior management has also determined a set of trigger points and associated management actions that are to occur should capital adequacy move outside the target range. These trigger points and management actions are:
- Maximum Capital Trigger Point means the point at which BIC SG considers its capital position is excessive and requires an investigation of opportunities for capital utilisation or repatriation.
- Target Operating Range means the minimum and maximum capital BIC SG seeks to maintain at any given time.
- Soft Trigger Point means the point at which BIC SG undertakes actions to actively review its capital position and investigate opportunities to increase the current level of capital.
- Capital Replenishment Trigger Point means the point at which BIC SG pursues immediate capital injection.
- Target Capital Replenishment Point means the level at which capital is restored following a capital injection. Capital will be restored to a level that at a minimum is within the Target Operating Range.
Capital adequacy is monitored monthly in order to gauge if any capital injections are required. Management keeps BIC US updated on any material developments that might warrant additional capital.
The MAS sets minimum requirements with regards to capital adequacy such that the financial resources of a licenced insurer are not less than a percentage of total risk requirements or SG$5M whichever is the greater. BIC SG has met this requirement at all times during the year.
Regulatory capital of BIC SG was 255% as of 31st December 2021 and 280% as of 31st December 2020.
BIC SG has established an Investment Policy that sets out the investment guidelines to be adopted in respect to both the “onshore” and “offshore” portfolios in Singapore.
The objectives of the investment policy are to:
- Set out the parameters within which the investments of BIC SG are managed.
- Provide an investment framework that is consistent with the stated risk appetite and risk tolerances of BIC SG relating to investment risk, market risk, foreign exchange risk and liquidity risk.
- Meet the obligations of policyholders as and when they fall due by investing in a high quality diversified portfolio with the goal of achieving the highest after tax income while preserving capital and minimising volatility of total returns.
The investment policy outlines the universe of allowable investments and follows a conservative investment approach focussing on fixed income government, sovereign, multilateral and statutory issued bonds.
The portfolio duration will be determined based on the estimated duration of insurance liabilities. Proxies have been established to measure our portfolio management against. These proxies can be varied, by agreement with the BIC APAC Investment Committee, if there is a liability mismatch or having regard to the size and asset spread of the portfolio and cash flow requirements.
The portfolio duration may vary from the benchmark duration by up to 25%. Portfolio duration targets and liquidity requirements will be determined on an on-going basis in response to the liability profile information as it develops.
Environmental Risk Management
In recent years, environmental risk has emerged as an area of interest in the (re)insurance industry globally, including the Asia Pacific region. Environmental risk arises from the potential adverse impact of changes in the environment on economic activity and human well-being. More specifically, in the context of the (re)insurance industry, (re)insurers may indirectly exacerbate the level of environmental risk in several ways, including by (i) providing underwriting capacity for risks that support actions and/or operations with a considerable negative impact on the environment; and/or by (ii) investing in companies that have material environmental risk exposures.
BIC SG is committed to adhering to locally-issued regulations and guidance in the area of environmental risk management. Given this, BIC SG has started to incorporate environmental-specific considerations into their underwriting processes. Where the level of environmental risk posed by a particular book of business is deemed to be material, this will be escalated for review to the BIC APAC Risk & Compliance Committee, which is responsible for overseeing material risks to which BIC APAC is exposed to and for ensuring compliance with applicable laws and regulations in the region.
Additional information on BIC SG can be found as follows:
- W.R. Berkley Corporation website available at this hyperlink: www.wrberkley.com
- BIC SG’s MAS returns, available publicly from MAS and found at this hyperlink: https://www.mas.gov.sg/Statistics/Insurance-Statistics/Insurance-Company-Returns/I898G.aspx
- Our Annual Report for the latest financial year available publicly from ACRA at this hyperlink: bizfile.gov.sg. Alternatively, contact Monique Stip, CFO Asia at [email protected] for a copy.