The Insurance Authority (IA) has licensed its second and largest issuance of insurance-linked securities (ILS) in Hong Kong, in the form of a 144A catastrophe bond. Amounting to US$150 million (equivalent to approximately HK$1.18 billion), the catastrophe bond is sponsored by Peak Reinsurance Company via Blak Kite Re, a newly-established special purpose insurer in Hong Kong. Black Kite Re is incorporated in Hong Kong and licensed by the IA to carry out special purpose business in or from Hong Kong. The 144A bond is structured to cover industry losses inflicted by typhoons in Japan. Peak Re has also entered into a retrocession arrangement with Black Kite Re to provide the company with a multi-year protection against typhoon risk in Japan. The bond is both the largest and the first 144A cat bond issued from Hong Kong. In addition, the transaction is expected to be the first to utilise the Pilot ILS Grant Scheme introduced by the Government of Hong Kong last year. Commenting on the transaction, Franz Josef Hahn, CEO of Peak Re, says: “We are extremely proud to sponsor and complete the first ever 144A cat bond issued by a Hong Kong special purpose insurer. Through continued partnership with global ILS investors, Peak Re can play an important role in developing the ILS market and building resilience in Asia and beyond.” Sascha Bruns, director, head of global retrocession of Peak Re, says: “ILS has become an integral part of our retrocession strategy and has provided meaningful capacity to support the company’s strong business growth. The successful transaction demonstrates Peak Re’s ability to structure products that are both attractive to the capital markets and serves us well as a risk management tool.” Clement Cheung, CEO of the IA, adds: “With the impact of climate change vividly felt around the world, ILS is gaining prominent attention as an effective tool for risk transfer and a class of alternative investment. In realising the aspiration of Hong Kong to become a global risk management centre, we will sustain efforts in building a vibrant ILS ecosystem, thereby enhancing underwriting capacities, strengthening financial resilience and bridging protection gaps.” The first ILS catastrophe bond in Hong Kong was issued by special purpose insurer Greater Bay Re in October 2021.
