Hong Kong's first ILS sidecar backs mainland wind farms in global push
PICC Property and Casualty issued Hong Kong's first insurance-linked securities sidecar, worth US$12 million, to support mainland offshore wind farm reinsurance. Officials say the deal advances Hong Kong's role as a global risk management hub and plans to ease investor rules and introduce protected
PICC Property and Casualty Company has issued its inaugural US$12 million (HK$94 million) insurance-linked securities (ILS) in Hong Kong, in the form of a “sidecar,” offering protection to quota-share reinsurance for Chinese mainland offshore wind farm properties, the government announced on Wednesday.
Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, said the ILS and captive insurance can help enterprises spread and manage risks when “going global.” “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,” Hui said.
A “sidecar” is an ILS structure that allows investors to provide capital to support a specific insurance or reinsurance portfolio. Typically capitalised through equity or debt instruments such as preference shares or participating notes, it enables investors to share premiums, claims, and underwriting results with the sponsor on a quota-share basis for a designated portfolio.
Hui said the government will continue to work with the Insurance Authority (IA) to promote ILS, as advocated in the 2026 Policy Address, to narrow the protection gap for catastrophe and other specialty risks, and review investor restrictions to invigorate the ILS fund trading market. The government will also explore legislative amendments to introduce a “protected cell company” structure that helps further reduce ILS issuance costs to attract companies of various scales to choose Hong Kong as a base for managing group or regional risks, Hui added.
Clement Cheung Wan-ching, chief executive of the IA, said riding on policy support from the National Financial Regulatory Administration, the ILS issuance demonstrates Hong Kong’s determination and commitment to develop into a global risk management centre. Cheung said the IA will also facilitate the introduction of the “protected cell company” structure and review the existing definition of eligible ILS investors for a more vibrant trading market.
Since the ILS regulatory regime was established and the pilot grant scheme launched in 2021, seven catastrophe bonds and one “sidecar” have been issued in Hong Kong, raising about HK$6.3 billion in total, providing protection against catastrophe and other specialty risks on the Chinese mainland and overseas.