Taiping Re to sponsor Silk Road Re catastrophe bond out of Hong Kong

Taiping Reinsurance Company (Taiping Re), a Hong Kong based reinsurer that is part of the state-backed China Taiping Insurance Group, is in the process of sponsoring its first catastrophe bond, with a Silk Road Re Limited transaction set to be issued out of Hong Kong, Artemis can reveal.

We’re told that this Silk Road Re Limited catastrophe bond has been in the market for a few weeks, but is being relatively privately offered and will consist of private notes, so we understand is not a full Rule 144A cat bond issuance.

It’s the latest cat bond to come out of Hong Kong since the country enacted its own insurance-linked securities (ILS) regulatory regime and began offering a grant scheme to attract sponsors.

China Taiping is a state-supported enterprise, so this new cat bond from Hong Kong fits the strategy of attracting Chinese sponsors to look to the capital markets for efficient reinsurance capital using its ILS regulatory regime.

Of course, the grant scheme assists in attracting sponsors as well and we understand can serve to constrain the size of these deals, to a degree. We’re told this Silk Road Re cat bond is likely to come in around the US dollar equivalent of the threshold required to access the ILS grant, which is HK $250 million, so around US $32 million, although we do not have details of the precise issuance size yet.

We’re told that Silk Road Re Limited has been established in Hong Kong in the last few months and authorised as a special purpose insurer (SPI) recently.

The special purpose insurer was named Silk Road Re Limited in November 2024 and then SPI authorisation was received from the regulator earlier this month.

We understand that Silk Road Re is set to issue a single tranche of privately placed cat bond notes, as we said not in a full Rule 144A issuance, so presumably in 4(a)2 form, or similar.

These notes are being sold to catastrophe bond investors and the proceeds will be used to collateralize a reinsurance agreement to benefit Taiping Re and its subsidiaries.

We understand the notes will provide Taiping Re with at least one year of protection, although we do not yet have full details on the duration of coverage.

The Silk Road Re cat bond will protect Taiping Re against losses from earthquakes in China and also certain natural catastrophe peak perils in the United States, sources told Artemis.

Given the two territory coverage approach, it’s not surprising to learn that the Silk Road Re cat bond will utilise multiple triggers to provide the reinsurance protection to sponsor Taiping Re.

We’re told that the Chinese earthquake cover will be structured on a parametric trigger basis, while the US nat cat peril coverage will be industry-loss index trigger based.

As a result, if successfully issued, this Silk Road Re cat bond will provide Taiping Re with a source of multi-peril and multi-territory retrocessional reinsurance supported by capital markets capacity, likely predominantly through specialist catastrophe bond funds and investors.

We don’t have any other details on this transaction at this stage, but will update you should further information emerge. We’re told the current schedule is for this placement to settle in 2024.

For Hong Kong, as an insurance-linked securities (ILS) domicile, as said this fits the strategy of helping Chinese domestic market companies access the global capital markets for reinsurance and risk transfer protection.

Silk Road Re will become the fourth catastrophe bond issued in Hong Kong, after China Re’s Greater Bay Re Ltd. (Series 2021-1) cat bond, Peak Re’s Black Kite Re Limited (Series 2022-1) which was the first 144A cat bond issued out of Hong Kong, and PICC Property and Casualty Company Limited’s Great Wall Re Limited deal.

In addition, Hong Kong saw the notes from the World bank facilitated IBRD – Chile 2023 cat bond listed on its stock exchange in 2023, and also the notes from the IBRD CAR Jamaica 2024 cat bond listed earlier this year.

You can read all about this new Silk Road Re Limited catastrophe bond and details on every other cat bond ever issued in the extensive Artemis Deal Directory.