Hong Kong now has its third disaster bond, after Chinese language home insurer PICC Property and Casualty Firm Restricted sponsored a $32.5 million Nice Wall Re Restricted deal, to supply it with earthquake reinsurance in China.
We reported earlier this week that the third disaster bond transaction to be issued out of Hong Kong was within the pipeline.
Now, late within the 12 months, this issuance has come to gentle, including $32.5 million to the annual tally for the disaster bond market and a welcome diversification alternative for cat bond funds and buyers.
It’s a debut disaster bond for Chinese language insurer PICC Property and Casualty Firm Restricted (PICC P&C), turning into the newest home market participant to leverage using Hong Kong’s ILS regulatory regime to entry the capital markets for reinsurance.
Because of this, that is the third disaster bond issuance to be domiciled in and issued out of the Hong Kong market.
PICC P&C arrange Nice Wall Re Restricted as a particular function insurer (SPI) domiciled and registered in Hong Kong.
Nice Wall Re Restricted has issued a single tranche of notes totalling $32.5 million and these notes have been bought to insurance-linked securities (ILS) buyers, with the proceeds used to collateralize a reinsurance settlement between the SPI and PICC P&C.
The Nice Wall Re cat bond, via this reinsurance settlement, will present PICC P&C with $32.5 million of totally collateralized reinsurance safety in opposition to losses from earthquakes in China operating throughout a three-year time period.
We’re advised that the Nice Wall Re cat bond utilises an indemnity set off and offers its safety to PICC P&C on a per-occurrence foundation.
The issuance of this cat bond additionally certified for Hong Kong’s Pilot ILS Grant Scheme, which gives to assist as much as HK $12 million in the direction of the issuance price of a transaction.
It’s the primary cat bond issued out of Hong Kong for a main insurer, so the primary to supply reinsurance as an alternative of retrocession, with the earlier sponsors having been China Re and Peak Re.
PICC P&C hailed it as “an necessary measure to construct a dual-pillar threat diversification system of reinsurance and insurance coverage threat securitization.”
Additionally calling the Nice Wall Re cat bond “a milestone of nice significance” for the insurer because it continues to construct out its threat administration capabilities.
The insurer additionally stated the cat bond offers “a strong complement to the prevailing disaster reinsurance preparations,” that it has in place, whereas permitting it to diversify its dangers into the capital markets.
PICC P&C stated it intends to “proceed to discover the function of disaster bonds in disaster threat administration” because it appears to be like to disperse its dangers to handle its exposures.
The Insurance coverage Authority of Hong Kong additionally hailed the third cat bond issuance.
” “The arrival of a second ILS issued in Hong Kong by main Mainland insurance coverage teams reinforces our essential function as a threat administration centre, serving distinctive wants of the nation whereas providing full and open entry by the remainder of the world. As efforts are stepped as much as enhance the quantity and number of ILS issuances, a vibrant ecosystem comprising key gamers on the worth chain will quickly take form in Hong Kong,” defined Mr Clement Cheung, Chief Government Officer of the IA.
“The IA will maintain collaboration with business stakeholders to grasp completely different targets set out within the Improvement Roadmap for the Insurance coverage Sector in Hong Kong and elevate our world competitiveness as a world finance centre,” Cheung added.
It’s good to see this third profitable Hong Kong domiciled disaster bond come to market and for it to convey the primary main insurer to utilise the capital markets for reinsurance threat switch on this manner.
You’ll be able to learn all concerning the Nice Wall Re Restricted disaster bond deal in Artemis’ in depth Deal Listing.