Hong Kong plans incentives to attract catastrophe bonds issuers, investors

Hong Kong plans to introduce incentives to attract more issuers and investors to catastrophe bonds as part of efforts to strengthen its role as a regional hub for climate risk financing. Since launching a regulatory framework in 2021, the city has facilitated seven Cat bond deals totaling USD800m, including two by Peak Reinsurance. Authorities are eyeing tax incentives to encourage family offices and institutional investors to increase allocations to insurance-linked securities, which transfer natural disaster risks to the capital markets. With a 90% protection gap for natural catastrophes in mainland China, Hong Kong sees an opportunity to leverage its financial infrastructure and proximity to high-risk areas. The global Cat bond market has reached USD50bn in outstanding risk coverage as of February.