The first China cat bond lists on BSX

  • Why it's needed: Panda Re will cover China earthquake risk. Pictured is the aftermath of the quake in May 2008 in Beichuan, China

    Why it's needed: Panda Re will cover China earthquake risk. Pictured is the aftermath of the quake in May 2008 in Beichuan, China

The first-ever China catastrophe bond has been set up in Bermuda.

The $50 million Panda Re bond, listed on the Bermuda Stock Exchange (BSX), will be used by sponsor China Re to cover earthquake losses across the mainland People’s Republic of China.

BSX president and CEO Greg Wojciechowski said: “The BSX is delighted to welcome the Panda Re deal to listing on the exchange.

“This deal, which is the first time that China Re has accessed the capital markets, could signal an opening for the insurance linked securities (ILS) market through geographic risk diversification, and I am delighted that Bermuda was chosen as the venue and platform for this to occur.”

He added: “The fact that Bermuda was that platform for this new security speaks to the comfort and acceptance that Bermuda has achieved in this industry segment.”

The catastrophe bond has the effect of transferring $50 million of earthquake risk to the capital markets.

China Re said the listing was a continuation of its internationalisation strategy and innovation development.

The firm added the Panda Re cat bond was also a sign of the “important progress” made by the Chinese insurance industry.

China Re chief financial officer and chief actuary Chen Sen said: “Panda Re has been a very successful first step into using alternative risk transfer mechanisms to strengthen and diversify our risk management strategy and that of our risk transfer partners.”

The firm used top catastrophe risk management specialist RMS’ China earthquake model to calculate the risk metrics for the bond.

Mr Sen said: “RMS was an obvious partner for our first foray into the capital markets.

“Not only are they widely trusted by international investors to conduct catastrophe risk analysis for new regions and new risks, the RMS China earthquake model is central to our view of earthquake risk.”

Mr Wojciechowski said: “Bermuda is the ‘world’s risk capital’ and has emerged as a centre of excellence for the creation, support and listing of ILS structures.

“Bermuda’s regulatory framework, the level of industry experience here, the sophistication of our service infrastructure coupled with our nimbleness and innovative approach to creating commercial solutions for our global clientele has resulted in our ability to excel in this niche industry segment.”

And he added: “Certainly our work has not gone unnoticed with many other locations seeking to emulate the Bermuda platform.

“It’s this platform built on solid industry experience and critical mass which is important in supporting new initiatives in the market and attracts the attention of those looking to enter the space.”

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Published Jul 3, 2015 at 8:00 am (Updated Jul 2, 2015 at 7:30 pm)

The first China cat bond lists on BSX

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