What next for Asia’s catastrophe bond & ILS market?

On the final day of our recent ILS Asia 2021 event the audience was treated to an insightful discussion on the Asian catastrophe bond and ILS market from Cory Anger of GC Securities.

With Hong Kong now established as a regulated domicile for insurance-linked securities (ILS) and catastrophe bonds, there could be several issuances out of the region by the end of 2021, according to Cory Anger.

“Both the Chinese regulator and the Hong Kong Insurance Authority have been very supportive of sponsors, using a Hong Kong Special Purpose reinsurer for an ILS deal, whether it’s through the grant scheme, whether it’s working them through the regulatory approval process,” said Anger.

As is the case in Singapore, in order to stimulate deal-flow out of Hong Kong the regulator has introduced a grant scheme which covers some of the costs of issuing a cat bond out of the region.

This approach has been successful in Singapore with the number of issuances growing year-on-year, and Anger feels that by offering this incentive, Hong Kong has shown that it wants to make it a success.

“I think they’re starting first with companies that haven’t yet brought as much risk to the ILS market, which is Chinese insurers and reinsurers. I think that that’s particularly exciting, because that’s really going to expand Asia risks that are available to the ILS market.

“I think it’s very exciting what they’re doing and in particularly supporting China to be ceding risk outwards, out of the country. It will help risk takers understand the risk better, but also should be promoting more capital support in the Asia Pacific region, being sourced from the ILS market,” said Anger.