The government of Hong Kong is weighing additional incentives to attract more catastrophe bond issuers and investors, following its second annual insurance-linked securities (ILS) conference aimed at promoting the city as a global hub for alternative risk transfer, according to a recent article from South China Morning Post.
Since launching its ILS regulatory regime in 2021, Hong Kong has hosted nearly US$800 million in catastrophe bond issuance, with issuers like the World Bank and Peak Reinsurance (Peak Re) raising a total of US $800 million from deals either issued there or listed on the local exchange.
Around US $300 million of that total has used a Hong Kong domiciled and regulated special purpose reinsurance vehicle (SPRV) structure for issuance, while the remaining US $500 million came from two World Bank cat bonds that listed their notes on the Hong Kong Exchange.
The IA recently highlighted the April issuance of Peak Re’s second catastrophe bond, the US $50 million Black Kite Re Limited (Series 2025-1) issuance, which covers earthquakes and typhoons in Japan, China and India, as a marker of the market’s maturity.
Peak Re debuted in the catastrophe bond market 2022 when it issued the US $150 million Black Kite Re Limited (Series 2022-1) deal.
Lau emphasised how 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.
“[While] we are able to attract new players in Hong Kong, we are also moving towards a new phase of attracting repeat issuers such as Peak Re,” Lau said.
Adding: “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.”
Mr Stephen Yiu, Chairman of the Insurance Authority of Hong Kong also said: “This event is aimed at satisfying the growing interest in making use of ILS as a tool for alternative risk transfer and deepen market understanding of its nature as an attractive investment product.
“The IA will spare no effort in fostering a holistic ecosystem that embraces data harvesting, risk modelling, product innovation and talent development in order to strengthen the competitiveness of Hong Kong as a global risk management centre.”
Lau also pointed to Hong Kong’s strategic location and its potential to serve as a fundraising gateway for catastrophe-prone mainland China, where the natural catastrophe protection gap stands at 90% – far above Asia’s average of 80%, and significantly higher than North America’s 30–40% range, according to data from the National Financial Regulatory Administration.
“Cat bonds not only offer new business opportunities for insurance companies but they also provide additional capital to support insurance companies to cover the damage caused by natural catastrophes. They have a strong social objective,” Lau said.
In addition to new incentives, the government has budgeted for a further three-year extension of its Pilot ILS Grant Scheme. Advisory groups such as the Financial Services Development Council have also recommended that the government consider integrating ILS products into its own investment portfolios as a way to demonstrate commitment to the sector and encourage broader participation.
The IA continues to promote Hong Kong as a viable and competitive alternative to traditional ILS domiciles such as Bermuda, with a focus on attracting both new and repeat issuers from across Asia and beyond.
