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MARKET REPORT - HONG KONG
no single or any group of players enjoys a dominant Chart 2: Hong Kong non-life business mix, 2014
position. The combined market share of the Top 5
non-life insurers in the territory is a mere 27%. 1% 1% Accident & Health
7% 26% Motor Vehicle, Damage & Liability
As always, Hong Kong does not rest on its Aircraft, Damage & Liability
laurels. A number of major strategic initiatives Ships, Damage & Liability
are currently underway which are expected to
sustain the market’s prosperous development well
into the future.
Modernising the regulatory and Goods in Transit
25%
supervisory regime Property Damage
The passage of the Insurance Companies General Liability
(Amendment) Bill 2014 in July 2015 was a key 11% Pecuniary Loss
milestone towards establishing a modern and state- 20% 5% Non-proportional Treaty Reinsurance
of-the art regulatory framework. This legislation 4% 0% Proportional Treaty Reinsurance
will pave the way for setting up an Independent
Insurance Authority (IIA), financially and
operationally independent from the government,
Source: Office of the Commissioner of Insurance
and a statutory licensing regime for insurance
intermediaries. The existing self-regulating bodies
will be dismantled and Hong Kong’s institutional approach Hong Kong service providers may enjoy national treatment in
to insurance regulation will be on par with other mature and the Guangdong Province, with effect from 1 March 2015. All
highly developed markets. By the end of 2016, the IIA should these measures have created additional business opportunities
have achieved operating status. for the Hong Kong insurance industry in the burgeoning
insurance market of Mainland China. Many Mainland Chinese
Another major initiative kick-started in 2014 is the are already coming to Hong Kong to buy insurance policies,
development of a risk-based capital (RBC) regime for the accounting for about 20% of total premiums in the territory.
insurance industry. It will replace the current rule-based capital They are particularly interested in competitively priced health
adequacy framework for insurers operating in Hong Kong. As insurance coverage and other longer-term products.
of today, capital adequacy is assessed on the basis of an insurer’s
solvency margin, with no consideration of the specific risk Against this backdrop, it is not surprising that Hong Kong
factors pertinent to the company‘s book of business. hosts the largest pool of RMB liquidity outside the Mainland,
amounting to over CNY1 trillion (US$157.58 billion). This pool
Going forward, the RBC framework will offer a more is able to support a full range of RMB products and financial
risk-sensitive approach to capital adequacy, with capital activities. This is a unique feature of the Hong Kong insurance
requirements for an insurance company being determined by market in international comparison. RMB insurance business,
the level of risk that the company is bearing. The proposed since its introduction in 2010, has become one of the major
RBC framework does not only cover quantitative capital drivers behind the long-term growth of Hong Kong’s insurance
requirements. As Solvency II, it features two additional pillars. industry. Through the concerted efforts of the Hong Kong
Pillar 2 sets out qualitative requirements, including corporate government and the insurance industry, the People’s Bank of
governance, Enterprise Risk Management and an Own Risk China is allowing an increasing number of Hong Kong insurers
and Solvency Assessment (ORSA). Pillar 3 focuses on risk to participate in the Mainland inter-bank bond market for
disclosure towards the regulator and the public. matching their long-term RMB liabilities.
Both the establishment of the IIA and the development of
a comprehensive RBC framework will align Hong Kong’s
insurance regime with international standards as defined by Attracting new players and products to Hong Kong
the International Association of Insurance Supervisors. By modernising the regulatory regime and promoting economic
integration with Mainland China, the Hong Kong government
also intends to attract new players, new products and services,
CEPA – Towards a closer economic integration with and more liquidity to the market, with a view to reinforce
the Mainland of China Hong Kong’s status as a regional insurance hub. Additional
Since the Mainland and Hong Kong Closer Economic specific measures include tax and regulatory concessions, and
Partnership Arrangement (CEPA) came into effect on 1 January launching promotional efforts to encourage more enterprises,
2004, Hong Kong‘s insurance sector has benefited from various
gradual measures of liberalisation. Hong Kong insurers who especially those from the Mainland, to set up captive insurers
meet the required access conditions are allowed to conduct in Hong Kong. This would help the risk management of Chinese
insurance business in the Mainland. enterprises, offer new business opportunities to Hong Kong
Hong Kong residents who possess the requisite qualifications insurers and support the ecosystem of support services available
in the territory.
and are appointed by a Mainland insurance institution may
engage in insurance related business across the border. Hong
Kong insurance agency companies are able to set up wholly- The bottom-line: A strong home base as a
owned enterprises in the Mainland to provide insurance agency prerequisite for successful internationalisation
services to Mainland insurers and Hong Kong insurance The internationalisation of Asian reinsurers is a reality. This
brokerage companies are allowed to set up wholly-owned trend reflects both macroeconomic shifts and commercial
insurance agency companies in the Guangdong Province logic from an individual company’s point of view. From
(including Shenzhen) on a pilot basis to facilitate cross-border Peak Re’s experience, the importance of a dynamic, vibrant
RMB reinsurance business between Guangdong and Hong and sophisticated domestic environment can hardly be
Kong. overestimated as a key success factor. A world-class business
environment at home is the best preparation for succeeding
In addition, in respect of establishing a commercial presence, and excelling abroad.
24 SIRC Supplement • November 2015 • www.asiainsurancereview.com Back to Contents
