China's National Financial Regulatory Administration (NFRA) has issued a notice supporting domestic insurance companies to issue “sidecar” insurance-linked securities (ILS) in the Hong Kong market, aiming to broaden catastrophe risk transfer channels and clarify supervisory expectations. The notice defines a sidecar as a structure in which an insurer proportionally cedes catastrophe risk, including from natural disasters such as earthquakes, typhoons and floods, or from major public health emergencies, to a specially established special purpose insurer that raises funding to meet potential claims by issuing equity- or debt-type ILS. Requirements on the establishment and management of the special purpose insurer, reinsurance arrangements and the securities issuance process are to follow the framework set out in the former China Banking and Insurance Regulatory Commission’s 2021 notice on Hong Kong catastrophe bond issuance, while solvency treatment for related reinsurance receivables and reserves applies counterparty default risk base factors in line with existing solvency supervision rules. NFRA said it will continue to track implementation of the notice and support insurers that wish to issue sidecar ILS in Hong Kong.
China Banking and Insurance Regulatory Commission 2025-10-28
China's National Financial Regulatory Administration sets rules for domestic insurers to issue sidecar insurance-linked securities in Hong Kong
China's National Financial Regulatory Administration supports domestic insurers in issuing "sidecar" insurance-linked securities (ILS) in Hong Kong to expand catastrophe risk transfer channels. The notice outlines sidecars' structure, reinsurance arrangements, and securities issuance, adhering to the 2021 framework for Hong Kong catastrophe bonds. NFRA will monitor implementation and assist insurers.