Hong Kong Exchange lists first catastrophe bond with World Bank Chile notes

Hong Kong has now listed the first catastrophe bond notes on its stock exchange, with the World Bank issued $350 million of IBRD – Chile 2023 cat bond notes now housed on the Hong Kong Exchanges and Clearing Limited (HKEX).

It’s the first ever catastrophe bond to be listed on the HKEX, as Hong Kong continues to make progress in the development of its insurance-linked securities (ILS) market offering.

Marking the inaugural ILS listing in Hong Kong, a gong-strike ceremony was held this morning at the HKEX exchange, with representatives from the World Bank, the HKSAR Government and the Hong Kong Insurance Authority (IA) present.

“The decision by a prominent international body like the World Bank to partner with Hong Kong marks an important milestone in our journey of striving to become a vibrant ILS hub, while enhancing public awareness on how alternative risk transfer tools could supplement underwriting capacity to increase financial inclusiveness and close protection gaps,” explained Stephen Yiu, Chairman of the IA.

“This Chile Catastrophe Bond is an example of how countries are putting in place financial safety nets to mitigate the potentially disruptive economic impacts of earthquakes,” added Jorge Familiar, Vice President and Treasurer of the World Bank. “We are pleased to partner with the Hong Kong Insurance Authority and the Hong Kong Stock Exchange in their efforts to evolve the insurance linked securities market, which strengthens the resilience of World Bank members to natural disasters.”

Watch our recent video interview with Jorge Familiar of the World Bank here.

The IBRD issued Chile catastrophe bond, that provides the Republic of Chile with $350 million of parametric earthquake protection, now becomes the fourth ILS transaction to have utilised Hong Kong’s regulatory framework efforts for insurance-linked securities.

The first Hong Kong based cat bond was a $30 million Greater Bay Re Ltd. (Series 2021-1) deal sponsored by mainland and state supported reinsurance giant China Re Group in September 2021, but that transaction did not utilise the country’s ILS grant scheme.

Previously, Hong Kong has seen its ILS Grant Scheme first used by Hong Kong based reinsurance company Peak Re, with its first-time catastrophe bond sponsorship of the Black Kite Re Limited (Series 2022-1) deal in June 2022.

Chinese domestic insurer PICC Property and Casualty Company Limited, sponsored a $32.5 million Great Wall Re Limited deal, to provide it with earthquake reinsurance in China, also taking advantage of the ILS Grant Scheme in Hong Kong.

“Hong Kong is driven towards development into a leading international risk management centre. This is the fourth issuance, as well as the inaugural listing, of ILS in Hong Kong. It bears testament to Hong Kong’s position as an international financial centre and the vibrant development of the Hong Kong insurance industry. Against the backdrop of a rising trend of catastrophic events caused by climate change, the HKSAR Government is committed to supporting the Hong Kong insurance sector in offering a greater variety of comprehensive products and solutions to assist our country and global market players for better management of relevant risks,” explained Paul Chan, Financial Secretary.

Christopher Hui, Secretary for Financial Services and the Treasury, also said, “As set out in the Development Roadmap for the Insurance Sector in Hong Kong published by the Government in December last year, we endeavour to be a facilitator in the national ‘Dual Circulation’ strategy through enhancing connectivity with the Mainland and international markets. Leveraging the dedicated regulatory regime and Pilot Grant Scheme rolled out early in 2021, we hope to attract more issuing institutions and talents for building up a vibrant ILS ecosystem in Hong Kong. Today’s issuance and listing exactly demonstrate Hong Kong’s unique bridging role.”

“We are pleased to be involved with this landmark issuance of catastrophe bond and swap, which is the largest of its kind for a single country led by the World Bank as well as the first insurance linked security to be listed on the Hong Kong Stock Exchange,” Stephen Yiu, Chairman of the Hong Kong Insurance Authority added. “Given that the frequency and intensity of natural disasters are on the rise, Hong Kong will continue to offer staunch support as a risk management center to bolster safety and resilience of the global community.”

“Another first today, as we warmly welcome the first Catastrophe Bond to HKEX’s markets. Today’s listing of the World Bank Catastrophe Bond reflects Hong Kong’s growing attractiveness as a platform for international issuers looking to access the region’s deep and diverse funding pool,” explained HKEX Chief Executive Officer Nicolas Aguzin. “This is also a particularly celebratory first, as the catastrophe bond helps to bring impactful change to communities by helping them better prepare for adversities brought about by natural disasters.”

“We are pleased to support the Government of Chile in their efforts to leverage capital markets to secure financial protection in case of earthquakes. This Catastrophe Bond is an example of how the World Bank can provide financial solutions to support the disaster risk management strategies of our member countries,” Jorge Familiar, Vice President and Treasurer of the World Bank also said. “We are proud to have partnered with the Hong Kong Insurance Authority (HKIA) and the Hong Kong Stock Exchange (HKEX) on this transaction that was very well-received by both the capital markets and the reinsurance market.”

Watch our recent video interview with Jorge Familiar of the World Bank here.

You can read all about this new IBRD – Chile 2023 catastrophe bond in the extensive Artemis Deal Directory.