Mainland Chinese insurers now have a working route for ceding risk to capital markets investors on a proportional basis through Hong Kong.
PICC Property & Casualty Company Limited (PICC P&C) has completed the city’s first insurance-linked securities (ILS) sidecar, a US$12 million (about HK$94 million) transaction that protects offshore wind farm properties in the Chinese mainland.
The deal went through Great Wall Re Limited, a special purpose insurer set up in 2022, and the Insurance Authority (IA) welcomed it on October 14.
Hong Kong and Singapore are both considering cell structures that would lower the cost of setting up such transactions.
IA chief executive officer Clement Cheung linked the deal to backing from the National Financial Regulatory Administration (NFRA), the mainland’s banking and insurance regulator.
“Riding on policy support from the National Financial Regulatory Administration, this ILS issuance fully demonstrates the commitment and determination with which we pursue the development of Hong Kong into a global risk management centre,” Cheung said.
In November 2025, NFRA had issued guidance encouraging domestic insurers and reinsurers to sponsor collateralized sidecars out of Hong Kong.
Under the structure the NFRA described, a special purpose insurer sells securities to investors and uses the proceeds to fund quota share reinsurance, and solvency treatment would follow standard reinsurance counterparty rules.
Sidecar investors typically take a proportional share of ceded premiums and losses, while catastrophe bonds usually pay out only when a defined event or loss threshold is met. The IA did not disclose the transaction’s term, investors, or perils, or specify which NFRA measure supported it.
Earlier mainland-sponsored ILS deals listed in Hong Kong were catastrophe bonds. They include China Re’s US$30 million Greater Bay Re bond in 2021, PICC P&C’s US$32.5 million Great Wall Re bond in 2022, and Taiping Re’s US$35 million Silk Road Re bond in December 2024.
The deal enters a global sidecar market that has grown quickly. Aon Securities estimated outstanding collateralised sidecar capital at a record US$23 billion as of June 30, up 50% from the end of 2024.
Aon has also linked record reinsurance capital to lower prices. Its executives said record capital and a widening ILS investor base point to property rate reductions of around 10% at the January 1, 2027 renewal.
Offshore wind is a fast-growing asset class in the mainland. China commissioned 6.6 GW of offshore wind capacity in 2025, and its fleet reached 48.4 GW, or roughly 52% of global capacity, according to figures from the Global Wind Energy Council’s 2026 report.
Cheung said the IA will continue efforts to facilitate the introduction of protected cell companies (PCCs) as an ILS structure. He added that the regulator will “review the existing definition of eligible ILS investors for a more vibrant trading market.”
Those rules govern distribution. In 2021, the Hong Kong Monetary Authority told intermediaries that sales of Hong Kong-issued ILS, including repackaged products and derivatives, are strictly limited to eligible ILS investors, and it described ILS as unsuitable for retail investors.
The current definition dates from the IA’s 2021 rulemaking. Respondents to its consultation asked the IA to add pension funds, sovereign wealth funds, family offices, foundations, and endowment funds, but the regulator kept its narrower list and set a US$250,000 minimum investment per transaction.
Similar measures appear in Hong Kong’s first Five-Year Plan, announced September 16, 2026. The plan proposes a possible protected cell company structure for captives and ILS issuance and a review of investor restrictions for ILS funds, though neither has a published timeline.
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A PCC houses multiple transactions in legally ring-fenced cells within one entity. Sponsors can then issue new deals without setting up a new special purpose insurer each time.
Singapore is pursuing a similar structure. The Monetary Authority of Singapore’s proposed PCC framework would cover collateralized reinsurance arrangements, including sidecars, as well as ILS issuance.
MAS consulted on the framework from July 7 to August 7, 2026. It has not said when the framework would take effect.
Read next: Singapore targets captive insurance with proposed PCC framework
Hong Kong had issued some US$800 million (about HK$6.2 billion) of insurance-linked securities by April 2025 under the regime and pilot grant scheme it introduced in 2021. The grant scheme has been extended until 2028.
