china

Chinese financial markets regulator the National Financial Regulatory Administration (NFRA) has issued guidance for domestic China market insurance and reinsurance companies to sponsor collateralised sidecar structures out of Hong Kong.

According to reports, the Chinese financial regulator and Shanghai government leaders have jointly announced the launch of a new reinsurance strategy that aims to bring digital trading of reinsurance risks to Shanghai.

Credit risk charges for mainland China insurance and reinsurance company sponsors of catastrophe bonds issued through Hong Kong insurance-linked securities (ILS) structures will be lower than the capital charges applied for ceding risk to reinsurance companies.

The availability of robust data sets and information on losses will be key for Hong Kong and China to deliver on their goals for insurance-linked securities (ILS) market development, according to speakers at a recent conference.

Carrie Lam, Chief Executive of the Government of Hong Kong, sees “enormous potential” for catastrophe bonds and insurance-linked securities (ILS) to provide important disaster risk capital to underpin risks in the Greater Bay Area.

The inaugural catastrophe bond issuance in Hong Kong is a clear vote of confidence in the Special Administrative Region (SAR) and a sign of the exciting opportunities that lie ahead, according to regulator the Insurance Authority (IA).

The first catastrophe bond to be issued out of Hong Kong positions the emerging insurance-linked securities (ILS) domicile as a gateway to global institutional capital for China’s risk transfer and reinsurance needs, according to Aon Securities, who also highlighted that local investors participated in the transaction.

The issuance of the first catastrophe bond through Hong Kong has helped to open up a new channel for risk diversification for the domestic catastrophe insurance market, according to the sponsor of the Greater Bay Re Ltd. (Series 2021-1), China Re Group.

The very first catastrophe bond to be issued out of Hong Kong has now been completed, with a $30 million Greater Bay Re Ltd. (Series 2021-1) cat bond coming to market on behalf of sponsoring reinsurer China Re.

China’s insurance regulator has called on insurers in the country to look to sponsor catastrophe bonds in Hong Kong as a way to access diversified sources of reinsurance capacity and offload peak natural catastrophe risks.