Hong Kong reveals insurance-linked securities (ILS) grant details

Hong Kong reveals insurance-linked securities (ILS) grant details

Hong Kongs Insurance Authority (IA), the independent insurance coverage and reinsurance regulator for the Hong Kong Special Administrative Region (HK SAR) of the Peoples Republic of China, has now released preliminary information of its insurance-linked securities (ILS) grant scheme.Back in February of this year, Financial Secretary of Hong Kong Paul Chan exposed prepare for a Pilot Insurance‑linked Securities Grant Scheme that will pay as much as HK $12 million per issuance, which is close to United States $1.6 countless prospective ILS or disaster bond issuance cost savings for sponsors selecting to utilize Hong Kong as a residence.
The Hong Kong Insurance Authority (IA) has now released details of a two-year Pilot Insurance-linked Securities Grant Scheme, which it states “provides an incentive for insurance provider and organisations to issue insurance-linked securities (ILS) in Hong Kong.”
The IA said that the grant scheme will incentivise ILS and catastrophe bond issuance in Hong Kong, while the IA continues efforts to finalise its regulatory plan for Special Purpose Insurers, which as we discussed just recently are being straightened out.
There was likewise a current relocation by Hong Kong to decrease the minimum investment size required in an ILS or catastrophe bond issuance, below United States $1 million to US $250,000, while guidance on what constitutes a qualified financier in these reinsurance connected properties was also tightened.
Hong Kong is enthusiastic and want to see its very first insurance-linked securities (ILS) or disaster bond issuance this year, with the ILS grant scheme likely to be a key motorist in attracting the nations initially sponsors.
Clement Cheung, Chief Executive Officer of the IA, commented, “The Grant Scheme and new regulative regime catapult Hong Kong into an attractive domicile for issuance of ILS, which will in turn assistance to boost sustainable advancement of the insurance coverage market and reinforce our status as a worldwide risk management centre.”
Both onshore and overseas sponsors of insurance-linked securities (ILS) will be eligible for the grant plan in Hong Kong, as long as issuance happens there.
Insurance coverage and reinsurance business sponsors can likewise be from multinational and supranational organisations, the IAs ILS grant scheme documents discusses.
While ILS issuances that receive a grant, must be at least HK$ 250 million (or comparable in foreign currency, approx US $32m) in size, and at least 20% of the ILS transaction in advance issuance expenses should go to company based locally in Hong Kong.
Newbie disaster bond or ILS sponsors will be prioritised as well, which is a favorable action for the entire market as the cost savings made can be engaging for any company looking to access insurance or reinsurance capital from institutional markets.
In addition, ILS issuances lodged with and cleared by the Central Moneymarkets Unit operated by the Hong Kong Monetary Authority will likewise be prioritised for the ILS grant plan.
A grant can likewise be offered to ILS deals with a shorter tenure, as the ILS grant in Hong Kong can cover in advance issuance expenses of up to HK$ 12 million (around United States $1.55 m) or 100% of overall in advance costs for an ILS with a 3 or more year period, and up to HK$ 6 million (around United States $775m) or 50% of total upfront costs if maturity of the ILS is up to 3 years.
Hong Kongs IA said prior to that it expects the pilot ILS grant scheme will “offer included tourist attraction to prospective sponsors.”
Sponsors have actually certainly been incentivised to target new domiciles due to the availability of grants, like Singapore, so there is every reason to believe Hong Kong might have its first ILS issuance underway later this year now the details of this grant are readily available.
Hong Kongs IA is inviting interested parties to get in touch to go over the ILS grant plan: [e-mail secured]

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