The Hong Kong government will offer incentives to attract more issuers and investors to participate in catastrophe bonds in the city to help address growing climate risks.
“Hong Kong is the best investment hub for catastrophe bonds because we have capital, financial infrastructure and all the professionals and brokers needed to support the issuance of these products,” said Clement Lau Chung-kin, executive director of policy and legislation at the Insurance Authority, on Friday.
Catastrophe bonds, also known as Cat bonds, are insurance-linked securities used by insurers to transfer extreme risks to bond investors – usually pension funds, sovereign investors, family offices and other wealth managers.
Since the government unveiled its Cat bond regulatory regime in 2021, seven deals have been completed, with issuers like the World Bank and Peak Reinsurance (Peak Re) raising a total of US$800 million.
Hong Kong-based Peak Re in April issued its second Cat bond, raising US$50 million to cover earthquakes and typhoon risks in Japan, China and India. That followed a US$150 million issuance in June 2022 to cover typhoon risks in Japan.
Lau said he would like to see more mainland and international insurers use Hong Kong as a Cat bond issuance hub, noting that currently most of these bonds were issued by US firms in Bermuda.
