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MARKET REPORT - HONG KONG

Beware of the pitfalls Chart 1: Hong Kong non-life combined ratio in % (net claims incurred, net commissions and
While, in the long run, the rise of emerging management expenses as a share of net premiums e arned)
markets-based reinsurers might be capable of
challenging the regional and global dominance 100.0
of traditional “Western” players, there are 90.0 87.3 87.7 88.5 91.9 89.3 90.0
major challenges for these players to overcome. 80.0
For instance, building a profitable global 70.0
portfolio and adopting a global approach to 60.0
recruiting talent can be daunting challenges. 50.0
In addition, adapting to a different culture 40.0
of doing business and communicating with 30.0
stakeholders can prove difficult, too.

How local cedants benefit 20.0

If designed carefully and executed diligently, 10.0

such strategies can significantly benefit 0.0 2010 2011 2012 2013 2014
local cedants. First, by diversifying 2009

geographically, Asian reinsurers enhance
their capital efficiency and, as a result,
Source: Office of the Commissioner of Insurance, 2014 combined ratio based on provisional figures

their competitiveness. Second, by venturing
abroad, they obtain a broader and deeper including more than half of the world’s top 20 insurers, Hong
understanding of the global risk landscape. This expertise and Kong exhibits an insurance spend per capita of more than
experience can be shared with local cedants who themselves US$5,600, ranking first in Asia and fifth globally.
are increasingly affected by global developments. Third, on 2014 was another good year for Hong Kong’s insurance
the back of successful moves towards internationalisation, industry. According to Office of the Commissioner of Insurance
Asian reinsurers reduce their vulnerability to local and (OCI), total gross premiums expanded by more than 13%, with
regional shocks, for example large catastrophe events, an life insurance accounting for 15% growth, and the non-life
unexpectedly sharp slowdown in economic growth or currency sector for some 4% - an impressive performance for a mature
depreciations. market.
Even more important: The local market is technically
A dynamic home market as a key success factor profitable. From 2009 to 2014, Hong Kong’s non-life insurers
Experience shows that internationalisation strategies tend displayed healthy aggregate combined ratios ranging from 87%
to be most effective when based on experience in a dynamic to 92% (see chart 1). Accident & Health and General Liability
and competitive local environment. Hong Kong is a widely are the two biggest lines of non-life business, accounting for
recognised case in point. It is one of the most open insurance 51% of the total (see chart 2). This is another indication of the
centres in the world. With more than 150 authorised insurers, market’s maturity and advanced stage of development. Finally,

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