The first catastrophe bond to be issued from Hong Kong positions the emerging home of insurance-related securities (ILS) as a gateway to global institutional capital for China’s risk transfer and reinsurance needs, according to Aon Securities, which also pointed out that local investors were involved in the transaction.
Aon Securities, the capital markets structuring and brokerage unit of the global insurance and reinsurance brokerage group, worked on the recent Greater Bay Re Ltd. catastrophe bond transaction. (series 2021-1) of $ 30 million.
The cat bond, the first of its kind to be domiciled and issued in Hong Kong, offers Chinese non-life reinsurer China Property & Casualty Reinsurance Company Ltd. $ 30 million catastrophe reinsurance protection per event against typhoon losses.
Aon Securities structured and placed the issue successfully.
The deal was structured as a zero coupon bond, as we revealed last week, and was placed with relatively few investors, with many cat bond funds around the world not even seeing the transaction before the end of its issuance.
However, Aon Securities noted that local investors participated, saying, “A significant percentage of bond investors were local in Hong Kong.”
A fact that the broker points out, “regional support for insurance-related securities (ILS) as a diversification asset class”.
This is interesting, because the Chinese government wants risks to be diversified outside of China, rather than being tightly held.
But, of course, local investment entities may in fact have used capital from overseas or further afield in Asia.
Aon Securities also noted that “Greater Bay Re Limited positions Hong Kong as an important gateway for global capital to support sustainable growth in China through non-traditional risk transfer solutions.”
Zhang Renjiang, Managing Director of China Property & Casualty Reinsurance Company Ltd., commented on the issue: “As the first catastrophe bond to be issued from Hong Kong, Greater Bay Re represents a milestone for the insurance industry. supporting the development of Guangdong-Hong Kong-Macao Greater Bay Area through the provision of disaster protection against typhoons. “
Paul Schultz, CEO of Aon Securities, added: “This pioneering transaction demonstrates Hong Kong’s potential to become a major risk transfer center for the region. The global insurance-related securities industry has had its strongest year in history, and we believe that solutions such as the CPCR catastrophe bond can only serve to maintain momentum and strengthen the position of the company. ‘ILS as an effective component of companies’ risk transfer strategies as they rethink access to capital.
Qin Lu, CEO of Aon’s Reinsurance Solutions Greater China and Aon’s Commercial Risk Solutions China, also said, “We are delighted that Aon has brought to market the first catastrophe bond issued by the Hong Kong Special Administrative Region to provide a protection against the underlying disaster of the SCRC. exhibitions. It is essential that we, as an industry, continue to develop and apply a range of solutions to close protection gaps for governments, organizations, communities and individuals.
Read also :
– Hong Kong’s first cat bond, Greater Bay Re secures $ 30 million in typhoon coverage from China Re.
– Cat bonds broaden China’s risk diversification channels: China Re.