Hong Kong publishes special purpose insurer (SPI) application guidelines

The Hong Kong Insurance Authority has today published guidelines related to its new insurance-linked securities (ILS) regulatory framework in the Government Gazette, with details on applications to establish special purpose insurers (SPI) in the domicile now finalised.

Hong Kong’s “Guideline on Application for Authorization to Carry On Special Purpose Business (GL 33)” is a comprehensive document that takes the completed legislation and turns it into something more usable, by making it relevant to those looking to apply to establish ILS structures in the Special Administrative Region (SAR).

Hong Kong’s readiness for ILS is now complete and with its pilot ILS grant scheme also available, alongside this guide for issuers and managers that helps in applying to operate ILS structures there, it may only be a matter of time until the first deal emerges.

As we explained earlier this week, Hong Kong has already had enquiries from potential sponsors and is engaging with the industry, in the hopes of having a first catastrophe bond deal ready and completed this year.

Now Gazetted, which is the official Hong Kong Government publishing of legislative changes, rules and guidance, these guidelines for applying for authorisation of an SPI to undertake ILS business in the country will come into effect on June 30th 2021, we understand.

The legislation was actually finalised earlier this year, with the Insurance Ordinance (Amendment) 2020 having come into effect in March 2021, but the availability of the guide signals Hong Kong’s ILS readiness to authorise applications and ILS issues.

The guideline document explains the requirements for getting an SPI authorised, as well as the fees payable, how SPI’s can be re-used for multiple issues, how reinsurance and risk transfer contracts can be rolled forwards, the filing requirements an SPI owner will face, as well as restrictions around the sale of ILS to certain investors.

There is also a diagram of the authorisation process for an SPI, but does not detail an expected time-line, as this would be different in each case, depending on the complexity and readiness of an issue.

It’s expected that authorisation speeds will be similarly as fast as other ILS domiciles in Hong Kong, as competitiveness often comes down to speed and ease of use, so this will be critical as an ILS market develops there.

You can hear from the Hong Kong Insurance Authority at our upcoming ILS Asia 2021 virtual event. Please register now, for free, to secure your place.