Chile’s $350m cat bond is first listed in Hong Kong

The World Bank has listed a $350m catastrophe bond on Hong Kong Exchanges and Clearing (HKEX) that provides the government of Chile with financial protection against severe earthquake events for the next three years.

This is the first World Bank bond and the first cat bond ever listed on the Hong Kong exchange, reports Commercial Risk’s sister paper Asia Insurance Review.

The $350m cat bond is part of a $630m aggregate earthquake risk coverage transaction for Chile that also includes $280m of cat swaps. It is the largest ever single-country catastrophe risk transfer transaction.

Chile’s high exposure to earthquake risks can significantly impact the government budget. This transaction offers financial resilience as part of a broader government strategy of disaster risk preparedness and fiscal responsibility, said the World Bank in a statement.

The cat bond is supported by the Hong Kong Insurance Authority, which administers a grant scheme established in 2021 to encourage the development of the insurance-linked securities (ILS) market in Hong Kong.

The World Bank has brought many landmark cat bond transactions to the ILS market, including the first pandemic cat bond, the largest-ever sovereign cat bond transaction and the first cat bond for a sovereign in Asia.

To date, the World Bank has provided almost $6bn in insurance coverage for clients through risk transfer transactions.

The Hong Kong government and the Insurance Authority welcomed the issuance of the cat bond by the World Bank in Hong Kong.

The cat bond issuance was celebrated in a ceremony at HKEX, attended by representatives of the World Bank, the Hong Kong government and the Hong Kong Insurance Authority.

Hong Kong’s financial secretary Paul Chan said: “Hong Kong is driven towards development into a leading international risk management centre. This is the fourth issuance, as well as the inaugural listing, of ILS in Hong Kong. It bears testament to Hong Kong’s position as an international financial centre and the vibrant development of the Hong Kong insurance industry.

“Against the backdrop of a rising trend of catastrophic events caused by climate change, the HKSAR government is committed to supporting the Hong Kong insurance sector in offering a greater variety of comprehensive products and solutions to assist our country and global market players for better management of relevant risks.”