FSTB welcomes inaugural issuance of "sidecar" insurance-linked securities in Hong Kong
The Financial Services and the Treasury Bureau welcomed an inaugural issuance of insurance-linked securities (ILS) in the form of "sidecar" by the PICC Property and Casualty Company Limited (PICC P&C) in Hong Kong, with a size of US$12 million (equivalent to about HK$94 million), providing quota share reinsurance protection for offshore windfarm property insurance businesses on the Chinese Mainland.
The Secretary for Financial Services and the Treasury, Mr Christopher Hui. Photo source: reference image
The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "To support the National 15th Five-Year Plan, which identifies the enhancement of the catastrophe risk protection framework and risk-pooling mechanisms as a key task, the Hong Kong's First Five-Year Plan published last month proposed fully leveraging Hong Kong's competitive edge in the international insurance, reinsurance, and capital markets to advance the synergised development of traditional insurance and non-traditional risk management tools. This will enable us to unleash the synergy effect of multilayered risk transfer and pooling mechanisms through ILS and other tools, thus consolidating our strategic role as a regional and global catastrophe and specialty risk management hub.
"We welcome PICC P&C’s issuance of Hong Kong's first 'sidecar'. This demonstrates Hong Kong's combined strengths in reinsurance and capital markets. The issuance marks the significant progress gained for Hong Kong's insurance industry and capital markets in risk transfer and the use of alternative capital under the support of our country. It will further enhance the market's capacity to manage catastrophe and other specialty risks, and consolidate Hong Kong's position as an international risk management centre. As announced by the Chief Executive in the 2026 Policy Address, we will continue to work with the Insurance Authority in promoting ILS, narrowing the protection gap for catastrophe and other specialty risk, and reviewing investor restrictions to invigorate the ILS fund trading market. Meanwhile, we will explore legislative amendments to introduce a 'protected cell company' structure, which will help further reduce the costs of issuing ILS, thereby attracting more companies of different scales to choose Hong Kong as a base for managing group or regional risks."
PICC. Photo source: reference image
Mr Hui added, "ILS and captive insurance, which we have long been promoting, can provide enterprises 'going global' with diversified means of spreading and managing risks. 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."
Since the establishment of the bespoke regulatory regime for ILS and the launch of the pilot grant scheme in 2021, seven catastrophe bonds and one "sidecar" have been issued in Hong Kong to date, with a total issuance amount of about HK$6.3 billion, securing protection against catastrophe and other specialty risks on the Chinese Mainland and overseas. In September 2025, the National Financial Regulatory Administration issued the "Notification on the Issuance of Insurance-linked Securities on Hong Kong Market by Domestic Chinese Insurers", which supports interested Mainland insurers to issue "sidecar" ILS in Hong Kong, with a view to diversifying the channels for dispersing catastrophe insurance risks.
A "sidecar" is an ILS structure through which investors provide capital to support a specific insurance or reinsurance portfolio. Generally speaking, a "sidecar" is typically capitalised through equity or a debt instrument (such as preference shares or participating notes), and enables investors to share, on a quota-share basis with the sponsor the premiums, claims and underwriting results of a designated insurance or reinsurance portfolio.
Source: AI-found images
