Climate change: Catastrophe bonds could see robust growth in China, as policymakers seek more financial tools to prepare for natural disasters
- ‘Promising developments’ on cat bonds have already started in China, Munich Re executive says
- Hong Kong has became an emerging hub for cat bonds in the past few years
China could see robust growth in catastrophe bonds, or cat bonds, as policymakers seek more financial tools to share the risks from losses from natural disasters, as climate change increases the frequency and severity of floods and typhoons, according to insurance experts.
Cat bonds could help China develop a multilayer risk-transfer mechanism that combines traditional insurance products and government subsidies, to increase the country’s capacity in post-disaster risk financing, when it comes to disaster relief and reconstruction.
Cat bonds are a variety of insurance-linked securities (ILS) typically sold by insurers or reinsurers to share risks associated with natural disasters. In 2023, the issuance of cat bonds reached a record high of US$15 billion globally, up by 8 per cent from 2022, according to Swiss Re, signalling robust investor interest and growing demand for transfer of risks from significant natural catastrophes.