The Zhitong Finance App learned that China People's Property Insurance issued the first insurance-linked securities in the form of side trailers in Hong Kong, issuing a total of 12 million US dollars, equivalent to about HK$94 million, to cover mainland offshore wind power insurance business through proportional reinsurance.
The Secretary for Financial Services and the Treasury, Mr Hui Ching-yu, said that Hsu Ching-yu is welcome to issue side trailers in Hong Kong, reflecting Hong Kong's comprehensive advantages in reinsurance and capital markets. It marks that with state support, Hong Kong's insurance industry and capital market have made significant progress in risk transfer and alternative capital use, enhancing the market's ability to cope with catastrophes and other special risks.
He also said that the government will study amendments to introduce protected unit companies to further reduce the cost of issuing insurance-linked securities, attract more companies of different sizes to choose Hong Kong as a region to manage group or regional risk, establish an exclusive regulatory system for insurance-linked securities in 2021, and launch a pilot funding scheme. So far, it has led to the issuance of 7 catastrophe bonds and 1 side trailer in Hong Kong, with a total issuance amount of about HK$6.3 billion.
The Insurance Regulatory Authority also welcomed the issuance of the first side-trailer insurance-linked securities by People's Insurance Insurance in Hong Kong. Zhang Yunzheng, Executive Director of the Insurance Regulatory Authority, pointed out that the Bureau will continue to promote the introduction of protected unit companies as an insurance-linked securities issuance structure and review the existing definition of an eligible insurance-linked securities investor to make the trading market more vibrant.
Side-trailers are insurance-linked securities structures. Investors provide capital to specific insurance or reinsurance portfolios through the relevant structure. Generally speaking, side trailers are mostly funded in the form of equity or debt instruments, such as preferred shares or notes, and the sponsor share the premiums, compensation, and underwriting performance of an insurance or reinsurance package in proportion.