Strong need for mainland China to tap the capital markets: ILS Asia 2021

Mr. Simon Lam, Executive Director, General Business at the Hong Kong Insurance Authority, expects the region’s new ILS regime to “hit the ground running” as mainland China’s insurance market growth continues apace.

With the issuance of Greater Bay Re Ltd., sponsored by China Re, expected soon as the first catastrophe bond to be issued out of Hong Kong, the insurance-linked securities (ILS) universe has a new domicile to choose from.

Like Singapore, Hong Kong’s regime offers a grant scheme which covers some of the issuance costs of cat bond transactions, something which has helped to attract sponsors to Singapore’s platform and which is seen as important for new domiciles to gain traction.

During the opening day of our recent virtual ILS Asia 2021 event, held in association with our headline sponsor AM RE Syndicate Inc., Mr. Lam, during an insightful keynote, discussed some of Hong Kong’s ambitions as an ILS domicile over the coming years.

This interview can now be viewed on-demand here.

“I think we should hit the ground running,” said Mr. Lam. “As I mentioned, we have strong support from the sponsors from the mainland insurance market. If you look at how the mainland insurance market is growing, and how the risk is accumulating, there’s certainly a very, very strong need to tap into the capital markets.”

While Hong Kong has ambitions to attract sponsors from all over the world, the entry of more Chinese sponsors into the market promises to bring new diversification, in terms of peril and geography, to the ILS investor base.

During his speech, Mr. Lam underlined the need for further diversification options within the ILS market, highlighting the importance of introducing new underlying risks that are not yet present in the marketplace.

“We want to be able to do so by bringing the mainland risks into the capital markets through the ILS offering,” he explained.

At the same time, he continued, it’s very important for Hong Kong as a domicile to nurture new and additional ILS investors.

“Traditionally it would be very much US and also European based ILS investors, but if you look at the way that ILS could be developing in Asia, I certainly see that there is a wider potential audience for ILS investors,” said Mr. Lam.

Adding, “So, therefore, if you put all those together, we want Hong Kong to be adding to the development of the ILS market. We might be a new competitor, so to say, to the existing regime, but that’s not what we’re after.

“We want to be able to make sure that we do our job well, as I mentioned earlier, be as effective and efficient as the other regimes, so that the sponsor would have a choice.

“And we also hope that by putting together a good platform, that US or European based service providers will find it meaningful for them to consider to expand into the Asian time zone, which is what is required because otherwise they will not be able to follow the sponsors here.”

You can watch this session of ILS Asia 2021 on-demand here.

As well as the on-demand playback, we will be archiving every session from our online and virtual ILS Asia 2021 conference over on our YouTube Channel in the coming weeks and audio versions will also be uploaded to our podcast which you can subscribe to here.

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