China encourages mainland insurers to sell catastrophe bonds

A notice was released by the China’s banking and insurance regulator. That encouraged the sales of catastrophe bonds by mainland insurers in Hong Kong. According to a statement of the China Banking and Insurance Regulatory Commission (CBIRC), the mainland property, casualty insurance companies and reinsurance companies can set up special-purpose entities in Hong Kong. This is for raising funds from bond sales.

These arrangements can help diversify insurers’ losses from natural disasters such as earthquakes, floods and typhoons. Earlier this year, there was a devastating summer floods in the populous province of Henan in central China. This sent a wake-up call for Chinese authorities for seeking better insurance cover against natural disasters.

The CBIRC said that in July it would guide insurers to increase investment in natural disasters insurances, enrich product offerings, as well as raise public awareness of risks to let natural disaster insurance play a greater role in national emergency response.