Hong Kong ILS regime (2021)
A legal framework opened in 2021 to domicile insurance securitization vehicles in Hong Kong, inaugurated by China Re's Greater Bay Re bond.
Until 2021, a Chinese cedent wishing to issue a catastrophe bond had to go through a vehicle in Bermuda, far from its regulator and its regional investors. That year Hong Kong adopted legislation creating the special purpose insurer, with a supervisory regime run by the Insurance Authority and a grant toward issuance costs. The goal is to make the city the domicile for risks from China and Asia, building on proximity to cedents. The regime admits parametric, index and multiple triggers. It illustrates a deeper shift: where vehicles are located follows the political geography of cedents as much as the law.
The first catastrophe bond issued out of Hong Kong, Greater Bay Re series 2021-1, raised 30 million dollars in October 2021 for China Re against typhoon. The regime's sixth issue, Taiping Re's 35-million-dollar Silk Road Re, was the first to combine Chinese earthquake and US named storm, with parametric and industry index triggers.
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