Hong Kong opens the door to insurance-linked securities business

With the sharp rise in the number of natural and other large-scale catastrophic events in recent years and the challenges posed by climate change, the demand for innovative solutions in risk management is driving changes to the traditional reinsurance model. Insurance-linked securities (ILS) first came on the market around two decades ago and since then the market has grown rapidly, with global issuance reaching approximately US$11 billion by 2019.

In response to the rising popularity of ILS in Asia, on 20 March 2020 the Hong Kong government published the Insurance (Amendment) Bill 2020 (the IA Amendment Bill) in the gazette, with a view to providing a new regulatory regime for ILS and making Hong Kong a more "conducive domicile" for ILS-related business opportunities.

In this article, we discuss the unique nature of ILS investments, the opportunities arising out of the emerging ILS landscape in the Guangdong-Hong Kong-Macau Greater Bay Area, as well as certain key provisions in the proposed ILS regime.

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