The Insurance Authority (IA) of Hong Kong has announced the issuance of a $35 million catastrophe bond by Taiping Reinsurance Company Limited through Silk Road Re Limited, a special purpose insurer.
The bond offers three years of protection starting Jan. 1, 2025, covering named storms in the US and earthquakes in Mainland China.
This issuance is the first in Hong Kong to address multiple perils and triggers, and the sixth overall since 2021.
The IA underscored the significance of this development in expanding the local insurance-linked securities (ILS) market.
“It reinforces our commitment to forging a holistic ecosystem that embraces data harvesting, catastrophe modelling, product design, investor education, and talent nurturing as well as to narrowing the protection gap caused by the rising frequency and intensity of natural catastrophes,” a spokesperson for the IA said.
The six ILS offerings launched since the introduction of Hong Kong’s regulatory framework and pilot grant scheme have collectively reached US$748 million.
The announcement coincides with findings from Verisk’s 2024 Global Modeled Catastrophe Losses Report, which indicated that average annual losses (AAL) from natural disasters worldwide were US$151 billion, with non-agricultural losses accounting for US$119 billion.
The report attributed these figures to rising property values, increased construction activity, and inflation in key markets over the last five years.
Urbanisation and exposure growth were identified as major contributors to higher modelled losses. Rapid city expansion in developing economies has led to increased risk in hazard-prone areas, while urban growth in advanced economies has also elevated exposure. As a result, global insured losses have been steadily increasing.
Despite recent stabilisation in inflation rates, exposure growth continues to play a central role in loss trends.
While the report noted that climate change accounts for approximately 1% of the annual rise in losses, this figure is expected to grow in the coming years.
Dr Jay Guin, executive vice president and chief research officer at Verisk Extreme Event Solutions, emphasised the importance of advanced risk models in understanding the complex interplay between climate variability, exposure growth, and economic inflation.
