Asian ILS brings Hong Kong cat bond listing to Bermuda
The head of the Bermuda Stock Exchange has hailed the importance of its listing of the first catastrophe bond to be issued out of Hong Kong.
The $30 million Greater Bay Re Ltd, Series 2021-1, cat bond secures protection against losses inflicted by typhoons in the Greater Bay region and other areas of high exposure to typhoons in China.
The territory’s first issuance of an insurance-linked security in the form of a cat bond was made available by the China Reinsurance (Group) Corporation and the state-backed China Property and Casualty Reinsurance Company Ltd through Greater Bay Re, the first authorised special-purpose insurer in Hong Kong.
Greg Wojciechowski, president and chief executive officer of the BSX, said: “The Greater Bay Re listing is a really significant development for us. We have had great success supporting Bermuda and globally domiciled securities.
“Investors are comfortable having their securities listed on the BSX as Bermuda and the BSX are tried and tested and known for being a reputable jurisdiction and well-regulated international exchange listings venue.
“We are delighted to see this issuer choose Bermuda because we have supported their products in the past and it shows confidence that they continue to choose Bermuda.”
At the end of the third quarter, the BSX had listed 210 ILS securities this year with an outstanding market cap of $15.4 billion.
Of the 1,259 listed securities on the BSX at the end of the quarter, 719 were ILS vehicles with an outstanding market cap of $50.2 billion — or 95 per cent of global issuances, Mr Wojciechowski said.
He added: “Bermuda has developed a deep bench to support this unique and important asset class that is providing recovery and resilience to communities around the world.
“The island continues to provide professional services to a global clientele.”
The Insurance Authority, Hong Kong’s independent insurance regulator, said that it welcomed the first issuance of an ILS.
Clement Cheung, chief executive officer of the IA, said: “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.”
The IA said that the increasing frequency and intensity of extreme-weather events, coupled with the rapid pace of urbanisation in the Asia Pacific region, render ILS an effective tool to mitigate the risks posed by natural catastrophes.
It added that a highly volatile market environment also increases the appetite among institutional investors for products that bear lesser correlation with economic cycles.
The IA said that the Chinese central government announced a series of policy measures including supporting mainland insurers to issue catastrophe bonds in Hong Kong.
Mr Cheung added: “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.”
The IA said that the issuance was made possible by a bespoke and streamlined regulatory regime for SPIs that it launched in March.
It added that the regime was complemented by the Pilot ILS Grant Scheme announced in the 2021-22 Chinese central government budget that subsidises upfront costs of up to HK$12 million (approximately $1.54 million) for each eligible transaction.