Hong Kong Regulatory Insurance Update January 2023

In this January 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: 18 January 2023  

Hong Kong’s insurance industry is undergoing a significant shift.  Prior to the pandemic, a significant proportion of whole life insurance premiums came from Mainland Chinese visitors who purchased their policies from Hong Kong because these offer more favourable terms and greater flexibility compared to policies sold in Mainland China.  Demand from these Mainland visitors started to decline in 2021 as COVID dictated travel restrictions prevented travel between the Mainland and Hong Kong.  

From 2022 insurers began shifting their focus towards digitalisation, environmental, social and governance (ESG) and workforce trends. Digital products and services for consumers gained popularity and simplified on-demand digital insurance products have gained traction.

In 2022, the Government announced its decision to strengthen Hong Kong’s status as a financial services (including insurance) hub and its plans to build after-sales services centres in Nansha and Qianhai as part of the Insurance Connect initiative[1] in the Greater Bay Area (GBA).  These centres make it easier for Mainland policyholders to make claims and greatly enhance Hong Kong insurers’ ability to service policyholders living in the Mainland.

Digitalisation is expected to continue during 2023 and beyond with the further development of customer-centric technology to better optimise the benefits of technology investments and to enable insurers to provide innovative and customer-centric solutions.

[1] The initial phase of Insurance Connect first allowed the direct settlement of health claims at public hospitals in Shenzhen with Hong Kong and Macau insurers, and it further enables Hong Kong insurers to establish customer service centres in the GBA.  

Link to insuranceasia.com

Date: 11 January 2023

The IA’s Annual Report 2021-22 provides an overview of its key activities intended to forge Hong Kong into a global risk management centre and regional insurance hub by leveraging on its “dual circulation” strategy[2].

The IA has taken key measures for the further protection of policyholders such as revamping its complaints handling system, launching programmes for tax-deductible insurance products, strengthening the Continuing Professional Development Requirements and stepping up enforcement actions and introducing publicity campaigns on lifetime risk profiling, fulfilment ratios, participating policies and digital onboarding.

[2] On domestic circulation, the IA is cooperating closely with relevant Mainland authorities on implementation of the unilateral recognition policy for motor vehicle insurance and setting up of after-sales service centres in selected Mainland cities of the Guangdong-Hong Kong-Macao GBA. On international circulation, issuance of two catastrophe bonds under the regulatory regime for insurance-linked securities and designation of three insurance groups under the group-wide supervision framework exemplified the crucial role of Hong Kong as a super connector between the Mainland and the rest of the world.

Link to IA press release

Link to IA 2021-22 Annual Report

Date: 11 January 2023

The IA hosted a panel discussion titled “Insurance Innovation Unlocking Business Potential in a Post-Pandemic New Normal” at the Asian Financial Forum (AFF).  This provided a platform for industry leaders and experts to share insights into the changing risk appetite of businesses for emerging risks such as climate-related risks, inflation risks and geo-political risks and how the insurance industry can, through innovation. turn these challenges into opportunities.

The panel discussion elaborated on the future trends and opportunities for the Hong Kong insurance market in the next decade in view of noticeable trends of innovation in the life and non-life sectors since the beginning of the pandemic and the competitive edge of Hong Kong as a global risk management centre and regional insurance hub.

Link to IA press release

Date: 11 January 2023

Mr. John Lee, the Chief Executive, gave a keynote speech at the 2023 AFF highlighting:

  • the “Fintech Proof-of-Concept Subsidy Scheme”[3] (Fintech Scheme) introduced in 2021, which has approved various projects covering key financial service areas including wealth management, regulatory compliance, insurance payment and further funding the digitalisation of anti-money laundering, risk monitoring, client authentication, insurance claims. The Fintech Scheme’s second round is still open for applications;
  • the Government’s issue, in December 2022, of the Development Roadmap for the Insurance Sector in Hong Kong, the goal of which is to consolidate Hong Kong’s status as a global risk management centre and insurance hub, supporting market development in targeted areas including insurance-linked securities and reinsurance; and
  • the Government’s work towards establishing insurance after-sales service centres in locations such as Nansha in Guangzhou and Qianhai in Shenzhen, to provide Hong Kong policyholders in the GBA with support for compensation claims, policy renewals and general enquiries.

[3] This Scheme, which was launched by the Government since 2021, encourages fintech players to test innovative concepts that can boost their operational efficiency and expand customer services.

Link to Government press release

Date: 7 January 2023

The life insurance industry in Hong Kong shrank by 0.3% in 2021 and 4.6% in 2022.  However, it is predicted to rebound to growth with expectations of a compound annual growth rate of 3.5% in direct written premium, translating to premium growth from HK$500.3 billion in 2023 to HK$573.5 billion in 2026.

This news article notes that:

  • Chinese residents are a prominent consumer segment for Hong Kong life insurers as life insurance products available to them in Hong Kong offer greater flexibility and higher returns compared to China;
  • favourable regulatory developments and government measures will support the growth of life insurance in Hong Kong in the coming years; and
  • life insurers are expected to further benefit from the ongoing developments in the Guangdong-Hong Kong-Macao GBA.

Link to Insurance Business.com

Date: 5 January 2023

The IA has reiterated certain regulatory conduct matters relevant to cross border insurance business with the Mainland that apply to authorised insurers and licensed insurance intermediaries in Hong Kong. These have been covered in previous circulars issued during 2022.

Moving into 2023, the IA’s focus will increasingly be on ensuring the maintenance and enforcement of the standards of conduct and ethical business practices which the regulatory regime demands of professional insurance practitioners and the governance, controls and culture which underpin this, all of which aim to put policy holders interests first and ensure that they are treated fairly.

Link to circular

Traditional financial services will play an important role in our future as well. Last month, the Hong Kong SAR Government issued a "Development Roadmap for the Insurance Sector in Hong Kong". The goal is to consolidate our status as a global risk management centre and insurance hub.

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