The Insurance Authority (IA) is committed to reviewing the different parameters embedded in the risk-based capital (RBC) regime, with an emphasis on creating sufficient incentives for insurers and broker companies to place larger volumes of business in Hong Kong, according to the agency's chairman Mr Stephen Yiu.
Inward investments
In a statement, Mr Yiu said, “Admittedly, the efforts to attract inward investment are frustrated by misconceptions about Hong Kong.”
He adds that the best way to dispel such conceptions is to convince people to come and witness for themselves how the community is recovering steadily from the COVID-19 pandemic, addressing structural weaknesses of the economy in a determined and methodological manner by nurturing alternative sources of strategic growth.
Mr Yiu says that the IA has made meaningful contributions by hosting a meeting of the Capital, Solvency and Field Testing Working Group, combined with a one-day stakeholder engagement session in May 2024, and a meeting of the Macroprudential Monitoring Working Group in December 2023. Both underpinned the work of the International Association of Insurance Supervisors. Building on this experience, we will bid for other mega-events that attract influential visitors from abroad.
The RBC regime started in July 2024, placing the Hong Kong insurance market in full alignment with prevailing international standards. Under this, the capital requirement imposed on each insurer will be more sensitive to its asset-liability profile, thereby inducing sophisticated risk management.
Mr Yiu invites the insurance industry to suggest possible ways in which the balance between regulation and development could be better calibrated.
He said, “Although three out of the nine Internationally Active Insurance Groups (IAIGs) in the region are already based in Hong Kong, we cannot be complacent and should continuously refine the group-wide supervision (GWS) framework to increase our appeal.
“Riding on the favourable response to the GWS framework, we will render full support to the introduction of a simple and efficient pathway for enterprises incorporated overseas but with a prominent local presence to re-domicile in Hong Kong by encouraging insurers with matching attributes to pioneer the use of this convenient new channel, which complements the policy recently announced by the Government to develop a “headquarters economy”.
He also said, “In addition to improving and modernising the financial infrastructure, we must place appropriate attention on emerging problems, including the treacherous geopolitical landscape, rapid deglobalisation, accelerating climate change, aggravated cybersecurity threats, and frequent supply chain disruptions.”
The Hong Kong insurance market ranked 16th biggest in the world with total premiums of HK$550bn ($70.6bn), according to the Swiss Re sigma report, “World Insurance 2023”.