Hong Kong is continuing its efforts to create a local insurance-linked securities (ILS) market, with the government and insurance regulator seeking to introduce needed changes by the 2019-2020 legislative session.
In a speech by Financial Secretary Paul Chan at the Asian Insurance Forum on December 11, he said that the government is committed to forming a local ILS market, with Hong Kong seen as an ideal location to act as a bridge between local and regional re/insurers and the capital markets.
Hong Kong is one of the top financial hubs in Asia and the world and is a venue to vibrant capital markets and investment banking activities, both from mainland China and overseas.
“In the insurance sector, securitisation of risks, such as natural disaster risks, has also been developing fast,” Chan said. On one hand, insurance-linked securitisation can be seen as an alternative to reinsurance, thereby enriching the risk management tools available in the market. By securitising insured risks, reinsurers can transfer the risks to capital markets, so as to expand their capacity.”
“In parallel, insurance-linked securities (ILS) provide institutional investors with an investment alternative that is not related to economic cycles, helping them to diversify the risks of their investment portfolio.”
Chan said that the Hong Kong Government is targeting introducing the legislative amendments into the Legislative Council in the 2019-20 legislative session. He added that Hong Kong will greatly benefit from increased ILS activity, especially with mainland Chinese insurers seeking alternative tools to manage risks in agricultural, natural disaster, or infrastructure insurance.