China Re Group Sponsors First-Ever China Catastrophe Bond
On July 1, 2015, China Re Group successfully sponsored a Catastrophe Bond (“the Series 2015-1 Notes”) to cover its domestic earthquake risk, and became the first Chinese sponsor in the international catastrophe bond market.
It is the first step toward linking domestic insurance risks to the international capital market, and another milestone in China Re Group’s sustained strategy to grow internationally and execute innovative business solutions. It marks an important breakthrough for China’s insurance industry by combining theoretical research with insurance risk securitization. This is a significant development that is expected to have an impact on the financial market as a whole.
The Bond was sponsored by China Re P&C, a wholly owned subsidiary of China Re Group, and was issued through Panda Re, a special purpose vehicle set up in Bermuda to raise US$50 Million. Part of the earthquake insurance portfolio underwritten by China Re and China Re P&C was ceded to Panda Re, which then sought financing from the bond market by using the principal of the Bond as a fully collateralized US$ 50 Million cover.
In accordance with the reform requirements of the Central Party Committee and State Council, China is speeding up efforts to establish its own national catastrophe insurance system. The China Insurance Regulatory Commission (CIRC) has already submitted legislative proposals for a catastrophe insurance law. There already are catastrophe insurance pilot projects in full swing in some parts of China. In addition, a China Residential Earthquake Insurance Pool has been officially set up.
The successful issuance of Panda Re’s Catastrophe Bond lays the foundation for the future use of capital markets to build a multi-channel mechanism for the spread of catastrophe risk. This type of financing will also play an active role in shaping the development of our national catastrophe insurance system, as well as our insurance and risk management markets.
The Panda Re Catastrophe Bond drew the attention of global financial markets who regarded it as a major historical event for China’s insurance industry.
Both domestic and foreign media widely covered the issuance of this Catastrophe Bond. Xinhua News Agency issued a press release and several important financial media reported on it promptly.