Photo taken on Oct 3, 2020 shows a night view of Victoria Harbor in Hong Kong. (PHOTO / XINHUA)
The Hong Kong Insurance Authority has welcomed the inaugural issuance of insurance-linked securities in the financial hub.
The China Reinsurance (Group) Corporation and the China Property & Casualty Reinsurance Company Ltd issued a catastrophe bond through Greater Bay Re Limited, the first authorized special purpose insurer in the Hong Kong Special Administrative Region, securing protection against losses inflicted by typhoons in the Chinese mainland.
The increasing frequency and intensity of extreme weather events, coupled with the rapid urbanization in Asia Pacific, make insurance-linked securities an effective tool to mitigate the risks of natural catastrophes, the Hong Kong Insurance Authority said
“This decision of a leading state-owned reinsurer not only exemplifies the potential and attractiveness of Hong Kong as an emerging insurance-linked securities hub, but also demonstrates our crucial role as a global risk management center,’’ IA Chief Executive Officer Clement Cheung was quoted as saying in a statement issued by the IA.
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The increasing frequency and intensity of extreme weather events, coupled with the rapid urbanization in Asia Pacific, make ILS an effective tool to mitigate the risks of natural catastrophes, the IA said.
Cheung added that the IA will take advantage of the support from the central government to increase efforts to nurture an insurance-linked securities ecosystem, by increasing underwriting capacities, improving financial resilience and narrowing protection gaps.
A highly volatile market environment also stokes the appetite among institutional investors for products that bear lesser correlation with economic cycles.
A new, streamlined regulatory regime for SPIs was launched in March this year. It aims to facilitate the HKSAR to capture the potential business opportunities in Asia, especially the Guangdong-Hong Kong-Macao Greater Bay Area.
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The new regime was complemented by the “Pilot ILS Grant Scheme,’’ announced in the 2021-22 Budget that subsidizes upfront costs of up to HK$12 million for each eligible transaction.