Hong Kong Regulatory Insurance Update March 2023

In this March 2023 edition of Regulatory Insurance Update, the Hong Kong Corporate & Commercial Team provide the latest updates relating to the law and regulations, developments, and news in the insurance industry in Hong Kong.

Hong Kong_Skyline At Sunrise

Insurance industry news and developments

Date: 30 March 2023

The Insurance Authority (“IA”) hosted the 22nd Joint Meeting of the Insurance Regulators of Guangdong, Hong Kong, Macao and Shenzhen on 29 March 2023, where the four insurance regulators exchanged views on the latest market development trends and regulatory updates and innovative proposals to enhance connectivity within the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”).

Mr. Stephen Yiu, Chairman of the IA, commented that China will become the world’s largest insurance market by mid-2030s and collective efforts should be made by leveraging on the GBA to capture this opportunity. He emphasised the importance of coordination and liaison to inject more impetus into the real economy, as the 14th Five-Year Plan[1] has designated Hong Kong as a risk management centre in the context of national development.

[1] The 14th Five-Year Plan for National Economic and Social Development of the People’s Republic of China covering years 2021 to 2025 was officially endorsed by the National People’s Congress (NPC) on 11 March 2021, covering all aspects of development of China over the next five years and represents China’s 2035 vision.

Link to IA press release

Date: 30 March 2023

Mr. Clement Cheung, CEO of the IA, gave a presentation at the APAC CEO Forum.

Mr. Cheung provided an overview on the global insurance-linked securities (“ILS”) market, highlighting how catastrophe bonds (a form of ILS) can play a role in narrowing the natural catastrophe protection gap particularly for emerging markets. He also talked about the IA’s vision to develop a vibrant ILS hub in Hong Kong by attracting new sponsors, enlightening potential investors, enhancing product types, widening risk coverage and diversifying geographical spread.

Link to the presentation slides

Date: 28 March 2023

The HKSAR Government and the IA welcomed the issuance of ILS in the form of a catastrophe bond in the size of US$350 million (around HK$2.75 billion) by the World Bank (International Bank for Reconstruction and Development) (“World Bank”) in Hong Kong for protection against losses associated with earthquake risks in Chile in the next three years as part of Chile’s government’s strategy of disaster risk preparedness and fiscal responsibility.

This is the largest ever single-country catastrophe risk transfer transaction and marks the fourth issuance and the inaugural listing of ILS in Hong Kong, signifying Hong Kong’s growth into a leading international risk management centre. It is also the first World Bank bond and the first cat bond ever listed on the Hong Kong Exchanges and Clearing Limited (HKEX).

Mr. Stephen Yiu, Chairman of the IA, notes that the decision by the World Bank to partner with Hong Kong represents a key milestone in Hong Kong’s journey of becoming a vibrant ILS hub while enhancing public awareness on adopting alternative risk transfer tools to supplement underwriting capacity to increase financial inclusiveness and narrow protection gaps.

Link to IA press release

Link to World Bank’s press release

Date: 10 March 2023

The IA released provisional statistics for Hong Kong’s insurance industry in 2022 indicating a decrease in the total gross premiums by 7.7% to $556 billion over 2021. A brief summary of the provisional statistics is set out below:

Long-term business

  • Total revenue premiums of in-force long term business: HK$491.4 billion (decreased by 9.1%)
  • Total amount of payment made to policy holders in terms of claims and benefits: HK$297.8 billion (decreased by 3%)
  • New office premiums (excluding Retirement Scheme business) of long-term business: HK$134.9 billion (decreased by 19.1%)
  • New business premiums derived from Mainland visitors: HK$2.1 billion (increased by 200.3%), representing 1.5% of the total for individual businesses. The significant upturn is caused by impact of isolated transactions and a relatively low base of comparison for 2021.

General business

  • Gross and net premiums of general insurance business: HK$64.6 billion (increased by 4.5%) and HK$42.1 billion (increased by 1.6%) respectively against which payment of total gross claims was HK$30 billion (decreased by 4.5%).
  • Direct business generated overall underwriting profit of HK$2.2 billion (increased by 67.5%), with the net claims incurred ratio improved from 61% to 58.1% .
  • Gross and net premiums for reinsurance inward business: HK$17.6 billion (increased by 11.7%) and HK$8.9 billion (increased by 5.6%).
  • Overall underwriting profit generated from reinsurance inward business increased from $0.6 billion to HK$1.9 billion, with the net claims incurred ratio lowered from 59.8% to 44.7%.

Link to IA press release

Summary of 2022 Provisional Statistics

Mr. Stephen Yiu, Chairman of the IA, commented that China will become the world’s largest insurance market by mid-2030s and collective efforts should be made by leveraging on the GBA to capture this opportunity.

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