Source: China Business Journal
Recently, PICC Property and Casualty successfully issued a "sidecar" insurance-linked security (ILS) in Hong Kong to provide reinsurance coverage for its offshore wind power insurance portfolio. This issuance marks the first "sidecar"-structured ILS in the Hong Kong market and the first such issuance by a mainland Chinese insurer. It represents another innovative practice by the company in leveraging international capital markets to diversify insurance risk, following its successful catastrophe bond issuance in 2022.
A sidecar is a typical structure within insurance-linked securities (ILS). Insurers issue "sidecar" ILS to cede insurance risk to a specially formed special purpose insurer (SPI) via quota share reinsurance. The SPI raises claim funds by issuing equity or debt securities, deposits the proceeds into a trust account, and invests them in low-risk, highly liquid assets to ensure timely claim payments. Returns and losses on "sidecar" ILS are tied directly to the performance of the underlying quota share reinsurance contract. Its structure embodies the core features of shared returns, shared risk, and flexible capacity between insurers and capital market investors—hence the name "sidecar." Complementing catastrophe bonds that transfer risk through excess-of-loss reinsurance, "sidecar" ILS offers Chinese insurers a new tool to diversify risk channels and enhance underwriting capacity.
In 2025 year, 10 month, the "Notice on Matters Concerning Domestic Insurance Companies Issuing Certain Insurance-Linked Securities in the Hong Kong Market" (Jin Gui [Year 2025] Document No. 19) was issued to support eligible domestic insurance companies in issuing "sidecar" insurance-linked securities in the Hong Kong market.
In this issuance, PICC Property and Casualty Company Limited (PICC P&C), as the sponsor, issued sidecar notes through Great Wall Re Limited, a special purpose insurer in Hong Kong, to provide risk coverage for its offshore wind insurance underwriting. This issuance marks further exploration by PICC P&C into new models for accessing proportional reinsurance protection via international capital markets. It strengthens the dual-pillar risk dispersion framework of "reinsurance + securitization of insurance risks," accumulating practical experience to enhance catastrophe insurance underwriting capacity and support the development of China's multi-layered national catastrophe risk protection system.
This issuance introduces China's offshore wind insurance risks to international capital markets, enhances global investors' understanding of China's green energy insurance sector, and expands risk diversification channels for insurance services supporting green energy development.
Previously issued insurance-linked securities (ILS) in the Hong Kong market were structured as catastrophe bonds. This "side-car" issuance diversifies trading structures and business scenarios in Hong Kong's ILS market, fostering collaborative development among mainland and Hong Kong insurance markets, capital markets, and professional service providers. It strengthens Hong Kong's role as an international financial center, enhances its global competitiveness, and injects new momentum into financial innovation in the Greater Bay Area.
Next, PICC Property and Casualty will continue to uphold its political and people-centered mission, balancing development and safety. We will deepen the exploration of insurance risk securitization, expand channels for risk dispersion, and enhance our capacity to provide catastrophe protection. Through these efforts, we aim to contribute to China's national catastrophe risk protection system and support Hong Kong's development as an international financial center. Advertisement
