Merger and acquisition activity in the Hong Kong insurance sector is expected to continue over the next two years, given the increasing interest by mainland companies to acquire Hong Kong-based life insurers, said S&P Global Ratings.
The agency expects life insurers to strengthen their bancassurance partnerships, given that this channel accounted for about 41.3% of Hong Kong life insurance premiums in 2016.
The demand for this kind of partnership is rising, particularly with Hong Kong subsidiaries of Chinese banks as mainland customers are permitted to open Hong Kong bank accounts directly with these lenders.
Although growing influence from Chinese companies intensifies competition in Hong Kong’s insurance market, it also helps accelerate innovation among local insurers, allowing them to streamline processes and find new business opportunities, S&P said.
More cross-border distribution channels
“Market players will be pushed to their digital capabilities, in line with practices in China,” the report said. “We also expect more cross-border distribution channels will be cultivated, amid concerns by Chinese consumers that the government will further tighten controls on capital outflows.”
However, the insurance sector in Hong Kong is feeling the impact of tighter regulation by CIRC of mainland Chinese insurers. Mainland customers have been banned from using state-backed UnionPay, China’s biggest bank card provider, to buy investment-related insurance products in Hong Kong since last October.
The strengthened scrutiny may slow down the growth rate of premiums in Hong Kong’s life insurance industry, but S&P sees business from mainland customers continuing to boost premium growth. A