china

The city of Shanghai in China is once again targeting catastrophe bonds as a new offering for its local insurance and reinsurance market, as insurance-linked securities (ILS) remain a risk transfer tool target for the regulator in the area.

Artemis understand that there are a number of new efforts to use the UK’s ILS regulatory regime underway, with a range of transactions mooted and being explored or actively worked on currently. At the same time the UK regulator has noted the importance of ILS to the UK’s competitiveness.

The Chairman of Chinese reinsurance firm China Re visited Singapore recently where he discussed issues related to the reinsurers work in the Singapore re/insurance market, including discussions on the potential for cooperation between China Re and Singapore in the area of catastrophe bonds.

Brexit, or the impending exit from the European Union by the United Kingdom, has been seen to be deterring some potential sponsors of insurance-linked securities (ILS) transactions under the recently launched UK ILS regulatory and tax framework.

The United Kingdom government has been courting China and trying to encourage the country to look towards the UK and its recently enacted insurance-linked securities (ILS) regulatory and tax framework as a vehicle to help China and its entities gain access to greater disaster insurance or reinsurance protection.

Underscoring the need for significantly higher insurance and reinsurance penetration in China, the country’s government has reported that natural disasters during the month of July 2017 alone have resulted in direct economic losses of around US $20 billion.

The first parametric disaster insurance programme for farmers in China has been launched, covering participants against the impacts of flood, excessive rain, drought and low temperatures in 28 counties across Heilongjiang province.

The anticipated Shanghai Insurance Exchange could launch as early as this weekend, according to reports in Chinese news media. While product specifics remain private, reports suggest the exchange will facilitate insurance derivatives and other forms of risk securitization at some stage.

Local Chinese news media reports that a launch of the Shanghai Insurance Exchange is edging ever nearer, with a reported 91 companies having agreed to contribute a combined $343 million (2.235bn yuan) of capital to launch the exchange.

Some high-profile losses, persistent growth pressures and regulatory advances signal rapid growth for China’s reinsurance market in the coming months, not to mention a vast opportunity for insurance-linked securities (ILS) players, advise Moody’s.