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Insurance-linked Securities (“ILS”)

ILS are risk management tools allowing insurers and reinsurers to seek alternative capital by offloading insured risks to the capital markets through securitization. As a global risk management centre and insurance hub, Hong Kong aims to be a preferred ILS domicile. In particular, there are business opportunities arising from the Guangdong-Hong Kong-Macao Greater Bay Area development, with support from the Central Government for Mainland insurers to issue catastrophe bonds in Hong Kong1.

The Insurance (Amendment) Ordinance 2020 came to effect in March 2021 to provide for a bespoke, streamlined authorization and regulatory regime for Special Purpose Insurers (“SPI”) formed specifically for issuing ILS in Hong Kong.

Pilot ILS Grant Scheme

To encourage the development of the ILS market in Hong Kong, the two-year Pilot ILS Grant Scheme was announced in the 2021-22 Budget. The Scheme offers grants to eligibly ILS issuances in Hong Kong to cover up to 100% or HK$ 12 million of upfront costs.

Details of the Pilot ILS Grant Scheme are set out in the industry circular.

Contact and Related Information

Interested parties can write to [email protected] for more information about ILS issuance in Hong Kong and the Pilot ILS Grant Scheme.

Prospective applicants for authorization of SPIs are suggested to refer to the Guideline on Application for Authorization to Carry on Special Purpose Business.

Insurance-linked securities
You may see the above recording (in Mandarin only) from the Captive Forum 2020 to Mainland enterprises held on 27 October 2020 for information.

1The Central Government announced on 6 November 2019 its support for Mainland insurers to issue catastrophe bonds in Hong Kong and Macao by relaxing the requirements for establishing special purpose insurers.

July 2021