The Financial Services & the Treasury Bureau today welcomed the inaugural issuance of insurance-linked securities (ILS) in the form of a “sidecar” by the PICC Property & Casualty Company (PICC P&C) in Hong Kong.

With a size of US$12 million, equivalent to about HK$94 million, the “sidecar” issuance provides quota share reinsurance protection for offshore windfarm property insurance businesses on the Chinese Mainland.

Secretary for Financial Services & the Treasury Christopher Hui said: “We welcome PICC P&C’s issuance of Hong Kong’s first ‘sidecar’. This demonstrates Hong Kong’s combined strengths in reinsurance and capital markets.”

“The issuance marks significant progress gained for Hong Kong’s insurance industry and capital markets in risk transfer and the use of alternative capital under the support of our country. It will further enhance the market’s capacity to manage catastrophe and other specialty risks, and consolidate Hong Kong’s position as an international risk management centre,” Mr Hui added.

The financial services chief pointed out that Hong Kong’s First Five-Year Plan has proposed fully leveraging Hong Kong’s competitive edge in the international insurance, reinsurance, and capital markets, to advance the synergised development of traditional insurance and non-traditional risk management tools.

“This will enable us to unleash the synergy effect of multilayered risk transfer and pooling mechanisms through ILS and other tools, thus consolidating our strategic role as a regional and global catastrophe and specialty risk management hub,” he said.

Ultimately, the proposal aims to support the National 15th Five-Year Plan which identifies the enhancement of the catastrophe risk protection framework and risk-pooling mechanisms as a key task.

“ILS and captive insurance, which we have long been promoting, can provide enterprises ‘going global’ with diversified means of spreading and managing risks," Mr Hui added.

“We expect this combination of financial policy measures will allow enterprises to leverage Hong Kong as a safe haven for 'going global' with greater ease of mind.”