Hong Kong ILS regulatory regime effective, ironing out implementation details

ARTEMIS: Changes to Hong Kong’s insurance and reinsurance market regulation came into effect on March 29th, including the new regulatory regime for insurance-linked securities (ILS) business.

The Insurance Authority (IA) of Hong Kong has been working hard to put in place the necessary regulatory and tax regime for insurance-linked securities (ILS) issuance and business to be undertaken in the the Special Administrative Region.

As we previously explained, the Government of Hong Kong revealed its plans for an ILS grant scheme that will cover around US $1.6 million of costs for issuers and sponsors.

FULL ORIGINAL PUBLICATION HERE

Healthcare of Ontario Pension Plan (HOOPP) doubled ILS allocation in 2020

ARTEMIS: The Healthcare of Ontario Pension Plan (HOOPP), a large Canadian institutional retirement fund, has more than doubled its investments in the insurance-linked securities (ILS) asset class over the last year.

Insurance-linked securities (ILS), so investments into insurance-linked funds as well as some other reinsurance related securities, began in earnest for the Healthcare of Ontario Pension Plan (HOOPP) in late 2019.

Then in early 2020, HOOPP employed Bernard Van der Stichele, an experienced ILS and reinsurance sector executive, as a Portfolio Manager for its new Insurance-linked Securities investment program earlier this year.

FULL ORIGINAL PUBLICATION HERE

World Bank fully supportive of direct sovereign risk transfer: Bennett

ARTEMIS: The efforts of the World Bank around disaster risk financing for its members continues to be a real benefit, and while the organisation can and will do more, this isn’t about being the dominant force in the market, according to Michael Bennett, Head of Derivatives & Structured Finance, World Bank Treasury.

During last month’s annual ILS conference in New York City, held virtually for the first time owing to restrictions, Artemis spoke with Bennett about the World Bank’s use of reinsurance and insurance-linked securities (ILS) structures for member governments, and how this might evolve in the future.

So far, the World Bank has transferred some $4.5 billion of risk to the markets, of which the large majority (65%) has been via ILS structures; showing how beneficial capital markets-backed protection has been for both the organisation and its members.

FULL ORIGINAL PUBLICATION HERE

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

FULL ORIGINAL PUBLICATION HERE. COPY OF THE FULL WHITE PAPER HERE.

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.