Hong Kong to step up ILS ecosystem promotional efforts

Hong Kong’s Insurance Authority (IA) is set to increase its efforts to promote its nascent insurance-linked securities (ILS) framework and attract more catastrophe bond or ILS issuance activity to the country.

The Insurance Authority (IA) has been promoting Hong Kong’s ILS framework for a number of years now, with two catastrophe bonds issued there so far.

Hong Kong finalised its insurance-linked securities (ILS) regulatory regime last year, alongside the legislation necessary to establish special purpose insurance or reinsurance vehicles for securitisations and issuance of catastrophe bond notes.

Hong Kong also established a grant program offering for ILS issuance, meaning that sponsors can save on their catastrophe bond issuance costs by selecting Hong Kong as a domicile.

This work culminated in the successful issuance of the first catastrophe bond in Hong Kong, with the $30 million Greater Bay Re Ltd. (Series 2021-1) cat bond sponsored by mainland and state supported reinsurance giant, China Re Group.

Then in 2022, Hong Kong based reinsurance firm Peak Re sponsored its first catastrophe bond out of the domicile, making use of the grant program in the process.

Now, the Hong Kong IA has said that it is working with Mainland regulators and other relevant authorities on a number of market development initiatives, to expand its insurance and reinsurance market.

“Since the implementation of the regulatory regime for Special Purpose Insurers last year, two catastrophe bonds have been issued in Hong Kong,” the regulator explained.

Adding that, “The IA will step up its promotional efforts to build a stable and vibrant ecosystem for insurance-linked securities.”

Stephen Yiu, Chairman of the IA commented, “The IA will, as always, work together with the industry to facilitate the sustainable development of Hong Kong’s insurance market, enhance its global competitiveness and strive to provide better protection to policy holders.”

ILS is seen as an opportunity for Hong Kong to further diversify its financial services base, attracting more business to the country and strengthening its role as a global risk management centre and regional insurance and reinsurance hub.