Hong Kong moves closer to ILS hub with government bill

March 23 2020 by Andrew Tjaardstra

The Hong Kong government has published in its gazette a proposed bill amending the Insurance Ordinance, which will be introduced into the Legislative Council for first reading on March 25.

The bill seeks to enhance the regulatory framework for the regulation and supervision of insurance groups, where a holding company for the group is incorporated in Hong Kong.

The International Association of Insurance Supervisors mandates all markets’ insurance regulators to cooperate and coordinate with each other to facilitate ‘group-wide’ regulation of insurance groups.

The Insurance Authority (IA) has welcomed the bill which it says “provides for a bespoke, streamlined regulatory framework for the issuance of insurance-linked securities (ILS) through the formation of special purpose insurers (SPIs). ILS are alternative risk-management tools for transferring insurance risk to the capital markets, thus increasing the capacity of the insurance market and providing institutional investors with additional options for diversification.”

“The central government has announced support for mainland insurers to issue catastrophe bonds in Hong Kong,” said Moses Cheng, chairman of the IA. “The proposed legislative amendments will pave way for Hong Kong to become the preferred domicile for ILS, in particular catastrophe bonds. This will facilitate insurers to better capture business opportunities, and more importantly, extend the capacity of the insurance industry; thus enhancing its sustainable development.”

Insurers including AIA, FWD and Prudential have all supported the measures.

Huynh Thanh Phong, FWD group chief executive, commented: “As a pan-Asian insurer headquartered in Hong Kong, FWD fully supports the passage of the bill which will further cement Hong Kong’s position as a leading life insurance hub with international practices and a number of other advantageous factors such as its maturity, development, dynamism and geographic proximity to China.”

Phong added: “The genesis of FWD in Hong Kong serves as a pertinent example of the city’s wider pan-Asian opportunity to be a leading regional insurance hub.”

MORE FROM: Legal/Regulatory