Inaugural cat bond a clear vote of confidence in Hong Kong: Regulator

The inaugural catastrophe bond issuance in Hong Kong is a clear vote of confidence in the Special Administrative Region (SAR) and a sign of the exciting opportunities that lie ahead, according to regulator the Insurance Authority (IA).

The implementation of Hong Kong’s insurance-linked securities (ILS) regulatory regime and the legislation necessary to establish special purpose insurance or reinsurance vehicles for securitisations and issuance of catastrophe bond notes, is an initiative that has been portrayed as having close ties to mainland China.

This work culminated in the successful issuance of the first catastrophe bond in Hong Kong last month, with the $30 million Greater Bay Re Ltd. (Series 2021-1) cat bond sponsored by mainland and state supported reinsurance giant, China Re Group.


Bermuda Stock Exchange (BSX) lists first Hong Kong cat bond

The Bermuda Stock Exchange (BSX) continues to be the listing venue of choice for the catastrophe bond market with a significant percentage of the outstanding market housed there and has even won the listing for the first cat bond to be issued out of Hong Kong.

The Bermuda Stock Exchange (BSX), under the strategic guidance of President and Chief Executive Officer Greg Wojciechowski, has positioned itself as the home for catastrophe bond and insurance-linked securities (ILS) listings, winning the vast majority of notes to be issued in the market that require a listing.

In 2020, the BSX listed 253 ILS securities, which was almost 100 more than the 155 listed in 2019.

That put the Exchange as home to almost 93% of the $46.4 billion of cat bond and ILS risk capital outstanding in our Deal Directory at the end of last year.


Local investors took meaningful chunk of Greater Bay Re cat bond: Aon

The first catastrophe bond to be issued out of Hong Kong positions the emerging insurance-linked securities (ILS) domicile as a gateway to global institutional capital for China’s risk transfer and reinsurance needs, according to Aon Securities, who also highlighted that local investors participated in the transaction.

Aon Securities, the capital markets structuring and broker dealer entity of the global insurance and reinsurance broking group, worked on the recently completed $30 million Greater Bay Re Ltd. (Series 2021-1) catastrophe bond transaction.

The cat bond, the first of its kind to be domiciled in and issued out of Hong Kong, provides sponsoring Chinese non-life reinsurer China Property & Casualty Reinsurance Company Ltd. with $30 million of per-occurrence catastrophe reinsurance protection against losses from typhoons.


Catastrophe bonds broaden China’s risk diversification channels: China Re

The issuance of the first catastrophe bond through Hong Kong has helped to open up a new channel for risk diversification for the domestic catastrophe insurance market, according to the sponsor of the Greater Bay Re Ltd. (Series 2021-1), China Re Group.

Last week we reported that China Re had successfully secured the issuance of a $30 million catastrophe bond covering Chinese typhoon risks for its subsidiary China Re P&C, when the anticipated Greater Bay Re transaction was completed.

It’s a landmark cat bond transaction, being the first to be issued out of a new domicile, Hong Kong, while also being the first to cover a new peril from China, in typhoon risk.


First Hong Kong cat bond, Greater Bay Re gets China Re $30m of typhoon cover

The very first catastrophe bond to be issued out of Hong Kong has now been completed, with a $30 million Greater Bay Re Ltd. (Series 2021-1) cat bond coming to market on behalf of sponsoring reinsurer China Re.

The transaction actually completed in September, but has only come to light this morning as it was relatively privately marketed by Aon we understand, with only a handful of specialist cat bond funds or investors privy to the deal.

The Greater Bay Re Ltd. cat bond was issued as a zero-coupon deal and only provides its sponsor with a single year of retro reinsurance protection we understand.


Ledger Investing launches Nanorock casualty ILS fund

Ledger Investing has launched its first insurance-linked securities (ILS) fund, a casualty risk focused strategy backed by a single investor, and an ILS management unit, Ledger ILS Managers LLC. While the firm plans a $300 million co-mingled casualty ILS fund strategy as well.

Using its own technology platform, a marketplace for connecting capital market investor funding with insurance and reinsurance risks, Ledger Investing has announced the closing of Nanorock Fund Ltd.

The Nanorock Fund will invest primarily in casualty insurance risks through the Ledger Connect platform, its proprietary tech platform, with a range of longer-tailed liability driven lines in scope.


LADWP gets $30m of wildfire cover from new Power Protective Re cat bond

California based utility the Los Angeles Department of Water and Power (LADWP) has finally secured $30 million of wildfire insurance cover from its second catastrophe bond issue, after the Power Protective Re Ltd. (Series 2021-1) deal was priced at the raised coupon level.

The eventual and successful pricing of this second Power Protective Re cat bond demonstrates that wildfire insurance, or reinsurance, capacity is available from the insurance-linked securities (ILS) market.

But the process to get to this pricing shows that this is not at any cost and ILS funds and investors are demanding higher returns for the California wildfire peril after recent losses from it.


BlackRock aims to raise $2.3bn+ for ESG fund that targets cat bonds

Giant asset manager BlackRock is aiming to raise more than $2.3 billion for its new environmental, social and governance (ESG) investment fund strategy that includes catastrophe bonds as one of its target asset types.

As we were the first to cover back in August, the investment manager is marketing the soon to launch BlackRock ESG Capital Allocation Trust, a closed-end fund strategy focused on equity and debt securities, at least 80% of which will be expected to meet specified environmental, social and governance (ESG) criteria.

The strategy will see BlackRock’s portfolio managers for the ESG fund screen out certain issuers and focus on bonds that are demonstrably ESG appropriate.


UNDP launches Insurance & Risk Finance Facility, ILS support anticipated

The United Nations Development Programme (UNDP) has today launched the Insurance and Risk Finance Facility (IRFF), a new initiative that aims to build financial resilience and bridge a $1.4 trillion global health, mortality, and disaster protection gap, with support from the insurance-linked securities (ILS) market expected in future.

Importantly, this Insurance and Risk Finance Facility (IRFF) will work to channel risk to private insurance, reinsurance and capital markets over-time, and aims to significantly increase the role of insurance and risk-financing in development.

The German Government has contributed €35 million in funding to the Facility, which will be used for technical work and capacity building on the ground, as well as for the development of new insurance products.


China regulator calls on insurers to sponsor cat bonds in Hong Kong

China’s insurance regulator has called on insurers in the country to look to sponsor catastrophe bonds in Hong Kong as a way to access diversified sources of reinsurance capacity and offload peak natural catastrophe risks.

The China Banking and Insurance Regulatory Commission (CBIRC) said in a notice that domestic Chinese insurers sponsoring catastrophe bonds out of Hong Kong will be supporting its “closer” economic partnership agreement between the country and the Special Administrative Region.

As we’ve explained before, China’s government has been supportive of the development and introduction of catastrophe bond rules in Hong Kong and sees the special purpose reinsurance vehicles that can now be established there as a route for mainland Chinese insurers to access the capital markets for risk transfer and reinsurance purposes.