Silk Road Re Limited

Taiping Reinsurance Company (Taiping Re), a Hong Kong based reinsurer that is part of the state-backed China Taiping Insurance Group, is in the process of sponsoring its first catastrophe bond, with a Silk Road Re Limited transaction set to be issued out of Hong Kong.

We’re told that Silk Road Re Limited has been established in Hong Kong in the last few months and authorised as a special purpose insurer (SPI) recently.

The special purpose insurer was named Silk Road Re Limited in November 2024 and then SPI authorisation was received from the regulator earlier this month.

We understand that Silk Road Re is set to issue a single tranche of privately placed cat bond notes, as we said not in a full Rule 144A issuance, so presumably in 4(a)2 form, or similar.

These notes are being sold to catastrophe bond investors and the proceeds will be used to collateralize a reinsurance agreement to benefit Taiping Re and its subsidiaries.

In terms of issuance size, we’re currently lacking clear information on that but we are told it is likely to be just around the threshold required to qualify for the Hong Kong ILS grant scheme, which would be roughly equal to US $32 million (later confirmed to us as US $35m).

We understand the notes will provide Taiping Re with at least one year of protection, although we do not yet have full details on the duration of coverage (later confirmed to be approx three years).

The Silk Road Re cat bond will protect Taiping Re against losses from earthquakes in China and also certain natural catastrophe peak perils in the United States (later confirmed as named storms), sources told Artemis.

Given the two territory coverage approach, it’s not surprising to learn that the Silk Road Re cat bond will utilise multiple triggers to provide the reinsurance protection to sponsor Taiping Re.

We’re told that the Chinese earthquake cover will be structured on a parametric trigger basis, while the US nat cat peril coverage (named storms) will be industry-loss index trigger based.

As a result, if successfully issued, this Silk Road Re cat bond will provide Taiping Re with a source of multi-peril and multi-territory retrocessional reinsurance supported by capital markets capacity, likely predominantly through specialist catastrophe bond funds and investors, we understand.

We’re told this placement is expected to settle in 2024. As new information emerges we will update this directory entry.

Update 1:

We’ve learned this privately placed Silk Road Re cat bond has now been priced for Taiping Re, with the size of the issuance now confirmed to be US $35 million.

We’ve also now learned that the notes priced to pay investors a spread of 6%, while the term of coverage is three-year, to the end of 2027, with maturity scheduled for early January 2028.

We’ve also learned that the US peril that is covered on an industry loss trigger basis is named storm risks.

Other details remain the same.