Want to get your money out of China? Con­sider a for­eign in­sur­ance pol­icy

Main­lan­ders come to Hong Kong to buy in­sur­ance “Bring more than one credit card,” agents ad­vise

Bloomberg Businessweek (Asia) - - NEWS - −Al­fred Liu and Molly Wei

Hong Kong in­sur­ance agent Ray­mond Ng sold HK$28 mil­lion ($3.6 mil­lion) in in­sur­ance poli­cies to a main­land Chi­nese client in March. It took more than 800 credit card swipes to com­plete the trans­ac­tion.

Ng is one of dozens of Hong Kong agents—and maybe more—us­ing this and sim­i­lar tac­tics to get around new lim­its on main­lan­ders us­ing credit cards to buy in­sur­ance, ac­cord­ing to in­ter­views with five agents work­ing for four dif­fer­ent in­sur­ance com­pa­nies. Mak­ing mul­ti­ple swipes can de­feat a cap of about $5,000 per trans­ac­tion set by Chi­nese au­thor­i­ties in Fe­bru­ary. The coun­try is try­ing to slow the steady stream of cash go­ing abroad and into for­eign cur­rency as­sets. “There are al­ways ways around new re­stric­tions,” says Ng, who spoke on the con­di­tion his com­pany’s name not be used. “Chi­nese cus­tomers are ac­cel­er­at­ing the pace of mov­ing as­sets out­side China, es­pe­cially through in­sur­ance prod­ucts.”

These clients are re­act­ing to a slow­ing econ­omy and fears that the yuan, which was de­val­ued in 2015, could de­cline fur­ther. Hold­ing any kind of asset de­nom­i­nated in for­eign cur­ren­cies could pro­tect the pur­chas­ing power of their sav­ings. Chi­nese cit­i­zens are al­lowed to con­vert the equiv­a­lent of only $50,000 of yuan per year to other cur­ren­cies. When they travel abroad, in­clud­ing to Hong Kong, many of their trans­ac­tions us­ing China’s UnionPay credit and debit cards aren’t sub­ject to the limit. Ho­tel bills and lux­ury goods aren’t in­cluded. Nei­ther are in­sur­ance poli­cies for travel and health, though they’re sub­ject to the per-trans­ac­tion cap.

But main­land Chi­nese are com­ing to Hong Kong to also buy life in­sur­ance poli­cies with an in­vest­ment com­po­nent that can be cashed out in a few years. The money can then be in­vested in prop­erty or other as­sets, rais­ing fewer ques­tions about how it got out of the main­land. Large por­tions of the pre­mium can be paid up­front. Sales of in­sur­ance and re­lated in­vest­ment poli­cies to main­land vis­i­tors jumped 30 per­cent last year, ac­cord­ing to Hong Kong’s in­sur­ance com­mis­sion.

China views any pur­chases of the in­vest­ment-linked poli­cies as a vi­o­la­tion of the con­trols on cap­i­tal out­flow, said Wang Yun­gui, an of­fi­cial of the State Ad­min­is­tra­tion of For­eign Ex­change, or SAFE, at a news con­fer­ence in Bei­jing on March 22.

In prac­tice, though, it can be dif­fi­cult for reg­u­la­tors and credit card com­pa­nies to dis­tin­guish be­tween travel- and health-in­sur­ance poli­cies and life poli­cies with in­vest­ment com­po­nents, agents say. Swip­ing a credit card dozens or even hun­dreds of times isn’t il­le­gal in Hong Kong, a ter­ri­tory with a high de­gree of au­ton­omy from the main­land. When it im­posed the $5,000 limit, main­land reg­u­la­tor SAFE said it would “closely mon­i­tor” card­hold­ers and in­sur­ers for mul­ti­ple swip­ing, but it stopped short of ban­ning the prac­tice. A press of­fi­cer for UnionPay says it com­plies with reg­u­la­tory re­quire­ments by mon­i­tor­ing trans­ac­tions and an­a­lyz­ing data.

A spokesman for Hong Kong’s in­sur­ance reg­u­la­tor de­clined to com­ment. SAFE and the Peo­ple’s Bank of China, the na­tion’s mone­tary au­thor­ity, didn’t re­spond to re­quests for com­ment.

The British in­surer Pru­den­tial, which had pre­vi­ously pro­hib­ited its Hong Kong agents from swip­ing credit cards more than 10 times for each client, re­moved that ceil­ing as of March 21, ac­cord­ing to two agents briefed on the change. A spokesman for Pru­den­tial de­clined to com­ment.

Hong Kong-is­sued poli­cies of all sorts are also pop­u­lar in China be­cause they of­fer bet­ter ben­e­fi­ciary pay­ments and re­turns than main­land plans. Hong Kong health-in­sur­ance poli­cies pro­vide ac­cess to bet­ter care. In­sur­ance is shielded from seizure in the event of a bank­ruptcy in China or in crim­i­nal pro­ceed­ings, which have been in­ten­si­fy­ing un­der Pres­i­dent Xi Jin­ping’s an­ti­cor­rup­tion cam­paign.

The $5,000 cap was fol­lowed by a ban on elec­tronic trans­fers, such as on­line pay­ments, to buy life in­sur­ance, ac­cord­ing to notices seen by Bloomberg News. Agents who sell large poli­cies “are likely do­ing their best now to urge clients to buy their prod­ucts be­fore more strin­gent mea­sures are put in place,” says Steven Lam, a Hong Kong-based in­sur­ance an­a­lyst with Bloomberg In­tel­li­gence. Apart from swip­ing their card mul­ti­ple times, in­sur­ance buy­ers can also ask rel­a­tives or ben­e­fi­cia­ries to group to­gether to pay a large pre­mium, agents say.

There’s even in­sur­ance tourism. A Chi­nese com­pany that bro­kers in­sur­ance poli­cies, He­nan-based Hong Kong Eas­i­ness Wealth

Man­age­ment, of­fers travel to Hong Kong, in­clud­ing free air­fare and ac­com­mo­da­tion. Cus­tomers buy­ing poli­cies val­ued at more than 500,000 yuan ($77,000) get a first-class ticket plus two nights in a five-star ho­tel. Such a pur­chase would re­quire at least 15 card swipes. A trip was sched­uled for May, says Li Yida, the com­pany’s owner. “We will guide them through the whole process and swipe cards with them,” he says. “We’ve told them to bring more than one credit card, as they will be able to try more cards if one of them is not work­ing.”

The bot­tom line In­sur­ance poli­cies in for­eign cur­rency can help get around cap­i­tal con­trols, even with a $5,000 limit for each credit card swipe.

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