Hong Kong’s ILS grant scheme to cover ~US $1.6m of issuance costs

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Hong Kong’s Government has revealed some of the details of its proposed insurance-linked securities (ILS) grant scheme, through which it will pay a share of issuance costs for any ILS structures issued out of the Special Administrative Region.

The Hong Kong Special Administrative Region (HK SAR) of the People’s Republic of China has been preparing to allow insurance-linked securities (ILS) issuance from its financial market for a number of years now, seeking to establish itself as a venue for the issuance of catastrophe bonds and other reinsurance linked instruments.

The Hong Kong Government’s Legislative Council passed the Insurance (Amendment) Bill 2020 on July 17th and later said it was targeting a full introduction of the new ILS regulatory regime by the end of 2020 or early 2021.

Pacific Alliance hopes to expand cat bond to cover cyclones, floods, droughts

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The Pacific Alliance, a Latin American trade bloc made up of Chile, Colombia, Mexico and Peru, would like to expand on the coverage provided by their catastrophe bonds, with hydro-meteorological risks including tropical cyclones, drought, floods and even cold weather all mooted as potential perils to include.

The Ministries of Finance of the Pacific Alliance members met in late 2020 to discuss next steps in their disaster risk financing and catastrophe bond journey.

The Pacific Alliance trade bloc nations in Latin America currently benefit from a combined $1.36 billion of catastrophe bond backed earthquake insurance protection, in a landmark multi-country cat bond issuance brought to market in early 2018.

Cat bonds: Structurally diversifying & primed for growth, says Neuberger Berman

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Catastrophe bonds and insurance-linked securities are one of the “very few genuinely, structurally diversifying asset classes,” according to the Neuberger Berman Insurance-Linked Strategies team, who give the asset class a positive outlook for 2021.

Writing in a white paper, the Insurance-Linked Strategies team of global asset manager Neuberger Berman explain that they also believe catastrophe bonds remain attractively valued and as an asset class is set to continue growing.

Catastrophe bonds, among the ILS universe, are particularly attractive to institutional investors, given they enable access to the returns of “a fundamentally uncorrelated asset class (natural catastrophe risk) in a form that is typically more liquid than most reinsurance contracts and vehicles,” the Neuberger Berman ILS team states.

World Bank has ‘only scratched the surface’ on what it can do: Bennett, ILS NYC 2021

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The World Bank has “only scratched the surface” on what it can do with member governments that are looking to transfer some of their disaster risk to the reinsurance sector and the capital markets, according to Michael Bennett, Head of Derivatives & Structured Finance, World Bank Treasury.

The World Bank is an international organisation with 189 member governments. Through the use of both traditional reinsurance and the issuance of catastrophe bonds, a sub-sector of the insurance-linked securities (ILS) space, it helps its members transfer disaster risk to the markets.

The focus of the Treasury Department of the World Bank is often the tail-end of a broader engagement with a given member designed to assess and quantify their disaster risk.

Catastrophe protection gap needs capital market support: Bernardino, EIOPA

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Gabriel Bernardino, the soon to retire Chairman of the European Insurance and Occupational Pensions Authority (EIOPA), has highlighted the capital markets role in delivering catastrophe insurance that has fewer protection gaps.

In an interview with Brink News, Bernardino explained the need for multi-peril catastrophe insurance and reinsurance coverage that protects against the uncovered portion of risks, such as non-damage business interruption related to a pandemic or other peril, just as much as physical property damage.

“I think there is a clear recognition from all parties, that the current situation — when we look at the coverage of business interruption — is far from optimal. It creates risks for the companies and reputational risks for the insurance market,” Bernardino explained.

ILS maturing nicely, but education still needed: Mayer Brown, ILS NYC 2021

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Overall, the insurance-linked securities (ILS) market is maturing in an attractive manner but as new sponsors and jurisdictions enter the fold, there’s a need for continued education, according to global law firm Mayer Brown.

The legal work in the ILS world is significant and critical in driving innovation and ensuring everything is in order, the way both sponsors and investors really need it to be.

Against this backdrop, the final day of our Artemis ILS NYC 2021 conference commenced with a discussion with three Partners from Mayor Brown, all of whom work on numerous ILS transactions and structures.

ESG opportunity can be meaningful for ILS: Nephila’s Schauble, ILS NYC 2021

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Today, there’s a significant amount of capital looking to be deployed in an environmental, social, and governance (ESG) friendly way, which represents a material opportunity for the insurance-linked securities (ILS) asset class, says Barney Schauble, Head of Labs at Nephila Advisors.

Day two of our fifth annual and first virtual ILS NYC conference, started with an exploration of ESG and the impact opportunity in the ILS market.

While the concept is nothing new, in more recent years, ESG factors have become a hot topic in risk transfer and as the understanding and adoption of such practices and compliance continues to expand, the opportunity is growing.

Positive cat bond market momentum to continue in 2021: Aon Securities

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The property catastrophe bond market experienced a record year in 2020 with around $11 billion of new issuance and leading broker dealer Aon Securities believes the positive momentum will persist.

Aon Securities, the capital markets and insurance-linked securities (ILS) focused unit of the global insurance and reinsurance broker, said in its latest report that 2020 saw property catastrophe bond issuance rise by 104%, compared to the prior year.

Given this was the year the COVID-19 pandemic broke out and swept the globe, the increase in cat bond market activity is particularly impressive.