Greater Bay Re is the first Hong Kong cat bond to receive Typhoon coverage of US $ 30 million to China Re


The very first catastrophe bond issued from Hong Kong has now been closed, with a cat bond from Greater Bay Re Ltd. (2021-1 series) in the amount of 30 million

The deal actually closed in September but didn’t become known until this morning as, to the best of our knowledge, Aon was marketing it relatively privately and only a handful of specialized cat bond funds or investors were privy to the deal.

The Cat Bond from Greater Bay Re Ltd. was launched as a zero coupon deal and only offers its sponsor one year of reinsurance coverage, which we understand.

China Re is a state-owned reinsurer in China, so it is noteworthy that the first Hong Kong issue came from the company.

China Re already had a relatively small cat bond from Panda Re Ltd. in 2015. (2015-1 Series) to insure Chinese earthquake reinsurance coverage.

As we stated in June, the special purpose vehicle Greater Bay Re Limited was registered in Hong Kong and we knew at that time that the sponsor would be China Re P&C.

Greater Bay Re Limited has issued a single $ 30 million tranche of the 2021-1 Series Cat Bond Notes which have been structured as zero coupon notes and which we understand have been sold to a small group of Cat bond investors .

Aon Securities acted as the sole structuring agent and bookrunner for this issue.

The $ 30 million bonds will provide China Re with retro reinsurance coverage against certain losses from Chinese typhoons on a compensation trigger basis for one year. Coverage includes the Greater Bay region and other areas of high typhoon exposure as we know.

The maturity of the notes is expected in October 2022, it is said.

Because the $ 30 million worth of bonds issued by Greater Bay Re are inherently zero coupon, we have been advised that they have a face value of 96.96, which would be a rough coupon equivalent of 3.04%.

This is a notable achievement for Hong Kong, which managed to launch its first cat bond in the same year that its Insurance-Linked Securities (ILS) regulatory regime was completed.

“Clement Cheung, Chief Executive Officer of the Hong Kong Insurance Authority, commented,” This decision by a leading government reinsurer not only illustrates the potential and appeal of Hong Kong as an emerging ILS hub, but also demonstrates our critical role as a global risk management center.

“By taking full advantage of the explicit support of the central government, we will intensify our efforts to foster a dynamic ILS ecosystem and do our part to increase underwriting capacity, improve financial resilience and reduce protection gaps.”

The Hong Kong Insurance Authority also said ILS and cat bonds are “an effective tool for reducing the risk of natural disasters.” . “

China Re, as sponsor of Greater Bay Re’s Cat Bond, will have benefited from reduced issuance costs under Hong Kong’s pilot ILS grant program.

The South China Morning Post reported that Zhang Renjiang, General Manager of China Property & Casualty Reinsurance, commented on the issue: “The Greater Bay Area is one of the hardest hit areas in the country with many typhoons and heavy rainfall. It is of the utmost importance to have appropriate insurance arrangements in place to manage the risks of these natural disasters and to secure the development of the bay.

“The first catastrophe bond issue in Hong Kong is a huge step forward in advancing the development of the Greater Bay Area.”

You can find out everything about this new cat bond from Greater Bay Re Ltd. in our Artemis Deal Directory. (Series 2021-1), the first from Hong Kong.

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