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China’s National Financial Regulatory Administration (NFRA), the financial industry regulatory agency under the State Council of the People’s Republic, is continuing to promote Hong Kong as a venue for insurers and reinsurers to sponsor catastrophe bonds.
Speaking at a conference in Hong Kong this week, Li Yunze, the Chairman of the National Financial Regulatory Administration (NFRA), explained China’s ambition to see more of its own insurance and reinsurance companies establishing international branch offices in Hong Kong.
He also highlighted ILS as a continued focus, asking re/insurers to look to the Special Administrative Region as a location to sponsor catastrophe bonds and insurance-linked securities (ILS) out of.
“The Financial Regulatory Bureau firmly supports Hong Kong in consolidating and enhancing its status as an international financial center,” Li Yunze explained.
He went on to say that his regulatory organisation will “strongly support Hong Kong to consolidate and enhance its unique status and advantages under the “one country, two systems” system, maintain financial prosperity and stability in the long term, and achieve better development in the process of integrating into the overall national development.”
Part of this is in helping to make China’s financial market and its participants more open and connected with Hong Kong’s.
This includes encouraging Chinese insurance and reinsurance firms to establish their regional overseas headquarters in Hong Kong, supporting the ambitions of Chinese enterprises to “go global”.
China’s financial regulator also wants to “help build Hong Kong’s international risk management center,” with part of this being the encouragement of its use for ILS issuance.
Li Yunze said the NFRA will “Support more mainland insurance companies to issue catastrophe bonds in Hong Kong and support the accelerated development of Hong Kong’s international reinsurance market.”
It’s further encouraging statements from senior Chinese leaders in the government and regulatory arena, which should help to promote cat bonds and ILS, as well as the fact Hong Kong has a developing market for these instruments.
As we’ve reported before, China wants to strengthen its insurance system, with a particular focus on combatting the impacts of weather and natural disasters . The State Council, a key ruling body, has cited catastrophe bonds as one measure they believe can assist.
It’s also notable that, a few years back, credit risk charges for mainland China insurance and reinsurance company sponsors of catastrophe bonds issued through Hong Kong insurance-linked securities (ILS) structures were set at attractive levels.
Meanwhile, Hong Kong’s regulator has stated its determination to develop the capital market disaster risk transfer facilities for local insurers and reinsurers, as well as for municipalities in China.
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