First cat bond marks Hong Kong’s entry as emerging ILS hub

Hong Kong saw its first cat bond on Friday. It was issued by Greater Bay Re, the insurance-linked securities (ILS) special purpose vehicle – also the first of its kind in the region – registered in Hong Kong earlier this year. The vehicle is sponsored by state-owned China Re and its subsidiary China Property and Casualty Reinsurance Company.

Covering mainland Chinese typhoon risk in particularly exposed areas (including the Greater Bay area), the bond was privately marketed to specialist funds and investors by Aon.

Zhang Renjiang, general manager of China Property & Casualty Reinsurance, said: “The Greater Bay Area is among the worst-hit areas in the country, with many typhoons and heavy rains. It is of the utmost importance to have proper insurance arrangements to manage the risks in these natural catastrophes to safeguard the development of the bay area.”

According to Clement Cheung, chief executive of the Insurance Authority of Hong Kong, it could be the first of many ILS vehicles to emerge from the region.

“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,” he said.

“Taking full benefit of the explicit support given by the central government, 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.”