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Insurance Industry in Hong Kong

Overview

  • Hong Kong has one of the most developed insurance markets in the region, with the per capita insurance premium standing at high levels. Besides, Hong Kong has attracted many of the world's top insurance companies.
  • In the first half of 2016, total gross premiums increased 14 % year-on-year (YOY) to HK$207.5 billion (US$26.6 billion). Long-term insurance business represented about 88% of the total gross premiums for this period, while general business accounted for the remaining 12%.
  • The Chinese mainland recorded a growth of 32.2% in premiums income in the first three quarters of 2016, with that of long-term insurance business and general insurance business growing by 37.0% and 7.8% respectively.
  • In addition to the Chinese mainland's WTO liberalisation measures, Hong Kong's insurance sector and professionals can benefit from the CEPA agreement to gain enhanced access to the mainland’s insurance market.

Industry Data

Table: Insurance and Services Auxiliary to Insurance and Pension Funding
Table: Insurance and Services Auxiliary to Insurance and Pension Funding
Table: Insurance Market
Table: Insurance Market

According to the Office of the Commissioner of Insurance’s (OCI) provisional statistics for the first half of 2016, Hong Kong’s total gross premiums increased 14.0% YOY to HK$207.5 billion (US$26.6 billion), representing 18.5% of the city’s GDP in the first half of this year. General business grew 0.6% to HK$24 billion (US$3.1billion). During the same period, long-term in-force insurance business increased by 14% YOY to HK$183.5 billion (US$26.6 billion), while new long-term insurance business expanded faster at 18.9% YOY to HK$81.7 billion (US$10.5 billion). Analysed by gross premiums, long-term insurance business represented about 88% of the market, while general business accounted for the remaining 12%.

Service Providers

Authorised insurers

Table: Number of Authorised Insurers
Table: Number of Authorised Insurers

Hong Kong had 161 authorised insurers as of end-June 2016, about half of which were incorporated overseas. Among the overseas-incorporated insurers, Bermuda, the US and the UK took the lead. 

According to the Hong Kong’s Office of the Commissioner of Insurance (OCI) 2015 Annual Report, the top 10 insurers by overall gross premiums in 2014 were AXA General Insurance Hong Kong, Zurich Insurance Company Ltd, Bupa (Asia) Limited, China Taiping Insurance (HK) Company Limited, Bank of China Group Insurance Company Limited, QBE-HKSI Limited, AIG Insurance Hong Kong Limited, CNOOC Insurance Limited, Asia Insurance Company Limited, and AXA China Region Insurance Company Limited. The total amount of the gross premiums written by these insurers was HK$ 19.73 billion (US$ 2.53 billion) in 2014, accounting for 45.3% of the total market share.

Major mainland insurers which have been listed in Hong Kong include China Life Insurance (largest commercial insurance group in mainland China), Ping An Insurance of China, China Taiping Insurance and China Pacific Insurance. The People’s Insurance Company (Group) of China (PICC) was listed in Hong Kong in December 2012.

Insurance agents and brokers

Insurance agents and brokers serve as an intermediary between policyholders and the authorised insurers. While insurance agents are contracted with a certain insurance company, insurance brokers are not affiliated with any insurance company.
As at end-June 2016, there were 2,482 insurance agencies and 56,809 individual agents registered with the Insurance Agents Registration Board, and 744 authorised insurance brokers who are the members of the approved bodies of insurance brokers, namely The Hong Kong Confederation of Insurance Brokers and Professional Insurance Brokers Association.

Exports

Table: Exports of Insurance and Pension Services by Service Component
Table: Exports of Insurance and Pension Services by Service Component

Industry Development and Market Outlook

  • Against the backdrop of a highly matured market, an ageing population and rising general affluence, many insurers are already venturing into retirement planning and wealth management to meet consumer demands.
  • The Insurance Companies (Amendment) Ordinance 2015 was enacted by the Legislative Council in July 2015, paving the way for establishing the Independent Insurance Authority, as well as a statutory licensing regime to replace the existing self-regulatory system for insurance intermediaries. This changeover will help regulate the insurance business, protecting potential and existing policy holders and promoting the development of the industry.
  • To better protect policyholders and strengthen market stability in the event of insurer insolvency, the Hong Kong government has been working with the insurance industry to establish a Policyholders’ Protection Fund to cover both Individual and SME policyholders.
  • In line with the regional trend, multi-channel distribution for insurance products is growing in popularity. While insurance products are primarily distributed by insurance agents, bancassurance penetration (the distribution of insurance products by banks) has been growing rapidly. Asia, in particular China, continues to be viewed by global insurers and reinsurers as the region of opportunities. In addition to the Chinese mainland's WTO liberalisation, Hong Kong's insurance sector and professionals can benefit from the CEPA agreement signed with the mainland. (see the CEPA section below)

China’s Insurance Market

  • The Chinese mainland recorded a year-on-year growth of 32.18% in premiums income to RMB 2.52 trillion (about US$32.3 billion) in the first three quarters of 2016, with long-term insurance business and general insurance business growing by 37.0% and 7.8 % over the year respectively.
  • In the first three quarters of 2016, foreign-invested insurance companies on the mainland accounted for 6.0% of the life insurance market and 2% in property and casualty insurance market respectively. For foreign insurers, they have entered the Chinese market mainly through the formation of joint ventures with local companies.
  • It is estimated that 40% of the total population will be aged 60 or above by 2050, accentuating the need for more extensive health insurance protection on the mainland.
  • In April 2014, China Insurance Regulatory Commission (CIRC) announced to allow domestic or foreign insurance companies in acquiring one more mainland insurance company in the same business segment from June 2014, be it life insurance or property-and-casualty insurance, and any purchase of more than one-third of the equity stake of an insurer will be subject to regulatory approval. Currently, insurance companies on the mainland are only allowed to own one insurance company in each segment. The maximum limit of capital participation by a Hong Kong insurance company in a Mainland insurance company is 24.9%. The new arrangement is seen as conducive to industry consolidation, raising the operational efficiency of insurance companies on the mainland.

Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)

Under the CEPA framework, the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong (“Guangdong Agreement”) came into effect from March 2015. Measures related to the insurance sector included the following:

  • Encouraging Guangdong insurance companies to cede their business to Hong Kong insurance or reinsurance companies with RMB as the settlement currency.
  • Encouraging Hong Kong insurance companies to expand their reinsurance business to mainland reinsurance companies.
  • Allowing Guangdong insurance companies that fulfil regulatory requirements to appoint Hong Kong insurance companies to provide RMB insurance policies selling services in Hong Kong.

On the heels of the Guangdong Agreement, the Hong Kong government and the Ministry of Commerce (MoC) signed the Agreement on Trade in Services in November 2015 for implementation in June 2016. The subsidiary agreement extends the liberalisation of service from Guangdong to the whole of the Chinese mainland, hence promoting more opportunities for the insurance industry in both Hong Kong and the mainland.

There were 21 approved applications for Hong Kong service supplier (HKSS) for the sector of insurance and insurance-related services as of end-November 2016. Further details on the liberalisation measures on insurance services can be found here.

Content provided by Picture: Kenix Lee
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