The very first catastrophe bond issued from Hong Kong is now complete, with a $ 30 million cat bond from Greater Bay Re Ltd. (series 2021-1) marketed on behalf of the sponsoring reinsurer China Re.
The deal actually completed in September, but only came to light this morning as it was marketed relatively privately by Aon, from what we understand, with only a handful of funds specializing in cat bonds. or investors aware of the transaction.
The catastrophic obligation of Greater Bay Re Ltd. was issued as a zero coupon deal and only provides its sponsor with one year of retro reinsurance protection, we understand.
China Re is a state-owned reinsurer in China, so it should be noted that the first upcoming issue from Hong Kong is from the company.
China Re had previously sponsored such a relatively small bond cat Panda Re Ltd. (Series 2015-1) in 2015, to ensure reinsurance protection against earthquake risk in China.
As we explained in June, Greater Bay Re Limited’s special purpose issuing vehicle had been registered in Hong Kong and we knew at the time that the sponsor would be China Re P&C.
Greater Bay Re Limited issued a single $ 30 million tranche of series 2021-1 cat bond notes, which were structured as zero coupon notes and sold to a small group of cat bond investors, d ‘after what we understand.
Aon Securities acted as sole structuring agent and bookrunner for this issue.
The $ 30 million notes will provide China Re with a one-year retroactive source of reinsurance against certain losses from the Chinese typhoons, based on a compensation trigger. Coverage includes the Grande Baie region and other areas highly prone to typhoons, we understand.
The tickets are expected to expire in October 2022, we are told.
Being zero coupon in nature, the $ 30 million of notes issued by Greater Bay Re were priced at 96.96 par, we are told, which would imply a gross coupon equivalent of 3.04%.
This is a notable achievement for Hong Kong, which succeeded in bringing its first cat bond to market in the same year that its regulatory regime for insurance-related securities (ILS) was put in place. square.
Clement Cheung, Managing Director of the Insurance Authority of Hong Kong, said: “This decision by a leading public reinsurer not only illustrates the potential and attractiveness of Hong Kong as an emerging ILS hub, but also demonstrates our crucial role as a global risk management center.
“By taking full advantage of the explicit support provided by central government, we will intensify our efforts to develop a vibrant ILS ecosystem, playing our role in increasing underwriting capacities, improving financial resilience and narrowing the gaps. protection. “
The Hong Kong Insurance Authority also said ILS and catastrophic bonds are “an effective tool to mitigate the risks posed by natural disasters,” adding that volatile financial markets “also fuel institutional investors’ appetites for products less correlated to economic cycles. “
China Re, as sponsor of Greater Bay Re’s catastrophic bond, will have benefited from reduced issuance costs under the Hong Kong Pilot ILS Grant Scheme.
The South China Morning Post reported that Zhang Renjiang, Managing Director of China Property & Casualty Reinsurance, commented on the show, “The Great Bay region is one of the worst affected areas in the country, with many typhoons and heavy rain. It is of the utmost importance to have appropriate insurance arrangements to manage the risks of these natural disasters in order to safeguard the development of the Bay Area.
“The first catastrophe bond issue in Hong Kong is a big step forward in promoting the development of the Greater Bay Area.”
You can find out all about this new cat bond from Greater Bay Re Ltd. (Series 2021-1), the first to come out of Hong Kong, in our Artemis Deal Directory.