Hong Kong's International Financial Centre: Retrospect and Prospect

Mainland wealth invested in and through Hong Kong will surely grow as well. Capital controls
have typically had a portfolio diversification effect elsewhere, and, even when flows are
perfectly legitimate, differences in tax rates can be expected to reinforce such an effect.
Insurance
The insurance industry in Hong Kong remains strong and multi-dimensional. Gross
premia routinely total 11-12% of GDP, making Hong Kong the second biggest insurance market
in Asia after Japan. There is a stable base for products not linked to investments, while demand
for investment-linked products ebbs and flows with general market conditions. In the wake of the
2008 crisis, for example, such demand subsided. 53
Especially in light of Hong Kong’s aging and
relatively affluent population, however, linkages between insurance, investment, and wealth
management markets are expected to deepen considerably in coming years. Keeping the sector
strong is therefore a high priority. The idea of bringing the regulation and supervision of
insurance to global standards by establishing an independent insurance regulatory authority,
examined more fully below, must be viewed in this context.
Long-term life insurance policies, as well as health-related policies, dominate the local
market, while general business insurance typically accounts for around 15%. In 2009, there were
46 long-term insurers authorized to do business in Hong Kong, 110 general insurers, and 19
composite insurers. Much of the employment associated with the sector is accounted for by 538
authorized brokers and over 33,000 registered agents. Over 1 million new life insurance policies
are written annually. 54
Bolstering the local market significantly during the past decade has been
the Mandatory Provident Fund scheme, to which workers began contributing in December 2000.
This policy instrument is expected to inject an extra of USD4-5 billion a year into general
retirement accounts during the next half century. Insurance companies are major players in
managing associated trusts and steering associated investment portfolios.
For many Hong Kong-based insurers not entirely focused on local business, future plans
are obviously shaped by developments in China. Insurers and reinsurers are using Hong Kong as
a base for regional operations, citing transport links to Europe and North America, ease of access
to the Mainland, a solid legal regime, and better living conditions. China’s accession to the
World Trade Organization did much to stimulate this build-up, as did the Hong Kong-China
CEPA Agreement. China is already among the top ten insurance markets in the world, and
industry reports routinely estimate annual premium growth rates in excess of 30%.
The leading non-life insurance companies in Hong Kong include HSBC Insurance (Asia),
American Home Assurance, Bank of China Group Insurance, Ming An Insurance (Hong Kong),
QBE Hongkong & Shanghai Insurance and AXA General Insurance (Hong Kong). The top life
53 “Research and Markets: Hong Kong Insurance Market to 2013,” Business Wire, April 22, 2009
(http://www.researchandmarkets.com/research/4b4cc5/hong_kong_insuranc).
54 Office of the Commissioner of Insurance, Annual Report, 2009.
56