Panda Re (China Re, 2015)
The first catastrophe bond exposed to a Chinese peril, issued in July 2015 for 50 million dollars against earthquake in mainland China.
A peril that investors do not know sells poorly, even when it diversifies their portfolio, because no one wants to bear alone the cost of learning to model it. Chinese earthquake was in that position until 2015: no catastrophe bond carried it. The state-owned reinsurer China Re took the step through Panda Re, a Bermuda vehicle listed on the Bermuda Stock Exchange, with three years of cover. The trigger is indemnity-based, resting on losses from its own portfolio across the People's Republic excluding Hong Kong and Macau, which required investors to trust the cedent's data. A small first issue mainly serves to set a reference price for those that follow.
Panda Re Ltd. series 2015-1 closed on July 1, 2015 for 50 million dollars over three years, priced at 405 basis points over the money-market benchmark. Six years later, in October 2021, China Re also sponsored the first catastrophe bond issued out of Hong Kong, Greater Bay Re.
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