Making the reinsuring business reassuring
city’s reinsurance sector,” said Associate Professor Billy Mak Sui-choi of Hong Kong Baptist University’s Department of Finance and Decision Sciences.
Push-and-pull factors are seen to have been responsible for the decline in the local reinsurance business, with the city’s high compliance costs and the mainland’s vast market potential luring global reinsurance companies to relocate to Beijing. Singapore’s aggressive business promotion policies in recent years have further contributed to Hong Kong’s shrinking reinsurance industry.
“The Hong Kong government must act by granting more tax concessions, providing more tailor-made package solutions, and building a targeted business promotion team to get more reinsurance companies to set up their headquarters here,” said lawmaker Chan Kin-por, who represents the insurance sector in the Legislative Council.
If Hong Kong can relocate more reinsurance business activities here, its robust financial system and proximity to the mainland can be leveraged to develop the reinsurance business, experts say.
According to the FSDC report, the mainland’s reinsurance market is expected to hit HK$1.54 trillion by 2020, fuelled by the growth in the primary general and life-insurance markets.
Besides reinsurance, Hong Kong is lagging behind Singapore in marine and captive insurance activities.
“Hong Kong has the fourthlargest shipping registry in the world, representing 10 percent of the total number of vessels. However, the total marine premium purchased in the city represents just 0.6 percent of the global total marine insurance premium at HK$231.7 billion, indicating there’s room for further development,” the FSDC said.
The council expects the city’s marine market premiums to double or even triple, getting close to HK$4 billion, and elevate Hong Kong to become the Asia Pacific’s fourth-largest marine insurance market if the SAR can successfully build up a marine cluster.
While marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination, captive insurance is an alternative to self-insurance, in which a parent group company creates its own licensed insurance company to provide coverage for its sprawling business segments and asset classes.
“The Hong Kong government can consider relaxing the regulatory requirements for captive insurers, for example, allowing parent companies to establish their captive operations in Hong Kong without the licensing requirement in order to boost the number of captives here,” Terence Chong Tai-leung, executive director at the Chinese University of Hong Kong’s Institute of Global Economics and Finance, told China Daily.
The FSDC sees Hong Kong capable of being a captive insurance domicile center by 2020, with up to 10 captives licensed each year and a total of 50 by 2025.
If more than 20 captives can be set up in the city, there could be the cluster effect that creates market demand for captive and management services, asset management and regulator experience.