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Information Center > Press Releases > Insurance Authority welcomes the inaugural issuance of insurance-linked securities in Hong Kong

Insurance Authority welcomes the inaugural issuance of insurance-linked securities in Hong Kong

1 October 2021


The Insurance Authority (IA) today (1 October 2021) welcomed the inaugural issuance of insurance-linked securities (ILS) in the form of a catastrophe bond made available by the China Reinsurance (Group) Corporation and the China Property & Casualty Reinsurance Company Ltd through Greater Bay Re Limited, the first authorized special purpose insurer (SPI) in Hong Kong, securing protection against losses inflicted by typhoons in the Mainland.

“This decision of a leading state-owned reinsurer not only exemplifies the potential and attractiveness of Hong Kong as an emerging ILS hub, but also demonstrates our crucial role as a global risk management centre,” said Mr Clement Cheung, Chief Executive Officer of the IA.

The increasing frequency and intensity of extreme weather events, coupled with the rapid pace of urbanization in the Asia Pacific region, render ILS an effective tool to mitigate the risks posed by natural catastrophes. A highly volatile market environment also stokes the appetite among institutional investors for products that bear lesser correlation with economic cycles.

“Taking full benefit of the explicit support given by the Central Government1, we will ramp up efforts to nurture a vibrant ILS ecosystem, playing our part in increasing underwriting capacities, enhancing financial resilience and narrowing protection gaps,” Mr Cheung added.

In order to make this inaugural issuance possible, a bespoke and streamlined regulatory regime for SPIs was launched by the IA in March 2021. This was complemented by the Pilot ILS Grant Scheme announced in the 2021-22 Budget that subsidises upfront costs of up to HK$12 million for each eligible transaction.

Ends

1 After a meeting of the Leading Group for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area held in November 2019, the Central Government announced a series of policy measures, including supporting Mainland insurers to issue catastrophe bonds in Hong Kong. The China Banking and Insurance Regulatory Commission subsequently published a notice (Chinese only) in September 2021 to elaborate on the relevant details.