Hong Kong appetite for catastrophe bonds grows as Taiping Re becomes sixth issuer
Latest deal brings total issuance in Hong Kong to US$748 million since insurance-linked securities were made possible in 2021
Investors in Hong Kong are showing greater appetite for catastrophe bonds following the latest issuance by Taiping Reinsurance, the sixth such offering of insurance-linked securities in the city since the regulatory regime began in 2021.
Taiping Re raised US$35 million of notes to private investors through a special purpose vehicle called Silk Road Re, according to a statement. As part of the transaction, Silk Road Re will provide Taiping Re with multi-year protection against earthquake risk in mainland China and named windstorm risk in the US.
The three-year bond is Asia’s first featuring dual perils and dual triggers for payout, resulting in oversubscription and pricing at the lower end of the undisclosed indicative offer price range, the reinsurer said. The previous five deals only covered one country and one type of natural disaster.
The bond issue “has achieved effective diversification for the company’s catastrophic risk management”, CEO Yu Xiaodong said in the statement. “It also promotes the interconnection between the insurance market and the capital market.”
Catastrophe bonds, commonly known as cat bonds, are insurance-linked securities used by insurers to transfer extreme risks to bond investors. Since China Reinsurance (Group) sold the first such bonds in October 2021, the outstanding volume has increased to US$748 million. King & Wood Mallesons provided legal advice on all the deals.
