World Bank and Hong Kong partner on a $350 million cat bond for Chile
Hong Kong – The World Bank (International Bank for Reconstruction and Development, IBRD) participated in a ceremony at Hong Kong Exchanges and Clearing Limited (HKEX) Connect Hall to celebrate the listing of a US$ 350 million World Bank Catastrophe Bond (cat bond) 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 HKEX.
The $350 million cat bond is part of a $630 million aggregate earthquake risk coverage transaction for Chile that also includes $280 million 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.
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 US$6 billion in insurance coverage for clients through risk transfer transactions.
“We are pleased to be involved with this landmark issuance of catastrophe bond and swap, which is the largest of its kind for a single country led by the World Bank as well as the first insurance linked security to be listed on the Hong Kong Stock Exchange,” said Mr. Stephen Yiu, Chairman of the Hong Kong Insurance Authority. “Given that the frequency and intensity of natural disasters are on the rise, Hong Kong will continue to offer staunch support as a risk management center to bolster safety and resilience of the global community.”
“Another first today, as we warmly welcome the first Catastrophe Bond to HKEX’s markets. Today’s listing of the World Bank Catastrophe Bond reflects Hong Kong’s growing attractiveness as a platform for international issuers looking to access the region’s deep and diverse funding pool,” said HKEX Chief Executive Officer Nicolas Aguzin. “This is also a particularly celebratory first, as the catastrophe bond helps to bring impactful change to communities by helping them better prepare for adversities brought about by natural disasters.”
“We are pleased to support the Government of Chile in their efforts to leverage capital markets to secure financial protection in case of earthquakes. This Catastrophe Bond is an example of how the World Bank can provide financial solutions to support the disaster risk management strategies of our member countries,” said Jorge Familiar, Vice President and Treasurer. “We are proud to have partnered with the Hong Kong Insurance Authority (HKIA) and the Hong Kong Stock Exchange (HKEX) on this transaction that was very well-received by both the capital markets and the reinsurance market.”