CBIRC Supports Issuance of Catastrophe Bonds in Hong Kong by Domestic Insurers


China’s banking and insurance regulator plans to allow domestic insurance companies to issue catastrophe bonds via Hong Kong.

The China Banking and Insurance Regulatory Commission (CBRIC) recently issued the “Notice on Matters in Relation to Domestic Insurance Companies Issuing Catastrophe Bonds on the Hong Kong Market” (关于境内保险公司在香港市场发行巨灾债券有关事项的通知).

CBIRC said that the Notice has major significance for “forming a multi-tier catastrophe risk sharing mechanism and supporting Hong Kong’s development as a financial centre.”

The Notice contains provisions covering five areas including:

  1. Clarifying that the applicable scope for catastrophe bonds is transferring the risk and losses of catastrophes arising from natural disasters or sudden public health crises, including earthquakes, typhoons and floods.
  2. Clarifying that special purpose insurers (SPI) should be approved by Hong Kong’s insurance authorities, as well as outlining sound protection measures for separation from the insurance company.
  3. Clarifying that SPI serve as special insurance companies when engaging in re-insurance registration, as well as accept the catastrophe risk of insurance companies, with exemption from regulatory requirements in relation to ratings, capital and solvency.
  4. Clarify that insurance companies should strictly abide by the relevant laws of mainland China and Hong Kong, to ensure that catastrophe bond issuance is lawful and safe.
  5. Clarifying information reporting requirements for insurance companies issuing catastrophe funds.