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.
Aon Securities, the capital markets structuring and broker dealer entity of the global insurance and reinsurance broking group, worked on the recently completed $30 million Greater Bay Re Ltd. (Series 2021-1) catastrophe bond transaction.
The cat bond, the first of its kind to be domiciled in and issued out of Hong Kong, provides sponsoring Chinese non-life reinsurer China Property & Casualty Reinsurance Company Ltd. with $30 million of per-occurrence catastrophe reinsurance protection against losses from typhoons.
Aon Securities structured and placed the successful issuance.
The deal was structured as a zero-coupon bond, as we revealed last week and was placed with relatively few investors, with many cat bond funds from around the world not even seeing the transaction before its issuance was completed.
However, Aon Securities noted that local investors participated, saying, “A meaningful percentage of the bond’s investors were local to Hong Kong.”
A fact which the broker says highlights, “the regional support for insurance-linked securities (ILS) as a diversifying asset class.”
This is interesting, as the Chinese government is keen to see risk diversified away from China, rather than being closely held.
But, of course, local investment entities may actually have been using capital from overseas, or further afield in Asia.
Aon Securities also noted that, “Greater Bay Re Limited, positions Hong Kong as an important gateway for global capital to support sustainable growth in China through non-traditional risk transfer solutions.”
Zhang Renjiang, General Manager of China Property & Casualty Reinsurance Company Ltd., commented on the issuance, “As the first catastrophe bond to have been issued from Hong Kong, Greater Bay Re represents a significant milestone for the insurance industry in supporting the development of Guangdong-Hong Kong-Macau Greater Bay Area through the provision of typhoon catastrophe protection.”
Paul Schultz, CEO of Aon Securities, added, “This pioneering transaction demonstrates the potential for Hong Kong to become an important risk transfer hub for the region. The global insurance-linked securities sector has had its strongest year ever, and we believe that solutions such as the CPCR catastrophe bond can only serve to maintain momentum and solidify the position of ILS as an effective component of companies’ risk transfer strategies as they rethink access to capital.”
Qin Lu, CEO of Aon’s Reinsurance Solutions Greater China and Aon’s Commercial Risk Solutions China, also said, “We are excited that Aon has brought to market the first catastrophe bond issued from the Special Administrative Region of Hong Kong to provide protection for CPCR’s underlying catastrophe exposures. It is critical that we as an industry continue to develop and apply a range of solutions to close protection gaps for governments, organizations, communities and individuals.”
Aon Insurance Managers, the specialist insurance management unit of the broker, is manager of the Greater Bay Re Limited structure for the sponsor and also acting as one of the directors. This work was led by the Aon Insurance Managers team in Singapore, with support from Bermuda.