Hong Kong's International Financial Centre: Retrospect and Prospect

insurers include AIA (Bermuda), Manulife, HSBC Life, Prudential UK, AXA China (Bermuda)
and Hang Seng Life. Mainland insurers are also listed on the Hong Kong Exchange, including
China Life Insurance, Ping An Insurance of China, and PICC Property and Casualty Company.
As in closely related fields, the latter suggests a game-changing impending development,
namely the emergence of high-potential future business helping Chinese insurers invest in
foreign markets. As their premium income grows, there will also grow a natural pressure to
diversify reserves, maximize and protect returns, and prepare prudently for future claims. Once
again, this terrain is gradually being mapped out in larger Chinese plans to internationalize the
RMB. For the foreseeable future, no city on the Mainland will be able to match Hong Kong’s
capability in this regard. The possibilities for joint ventures with foreign insurers based in Hong
Kong, as well as for stand-alone Chinese insurance operations, are vast. Growth in this sector, in
turn, may be expected to spawn new investment products, new markets, and new linkages across
diverse segments of existing financial markets.
All of the world’s largest reinsurance companies have longstanding offices in Hong Kong,
including Munich Re, Swiss Re, General Re (Berkshire Hathaway), and Hannover Re. Measured
in terms of annual service exports from Hong Kong, reinsurance now accounts for about one
quarter of the total. 55
As in other sectors, significant regional offices are being built in Hong
Kong mainly to cover the Chinese market. Recent interviews with senior executives from major
European re-insurers suggest the aspiration, already within reach, not to be the largest reinsurers
on the Mainland but to be the most profitable.
Hong Kong’s traditional role as base for the regional headquarters of multinationals and its
position as a gateway into the Mainland position it very well to develop another sector of
changing global insurance markets, namely the captive insurance sector. Partly a tax-driven
business, captive insurers are typically wholly-owned subsidiaries of parent firms enabling those
firms to manage risks, and retain insurance premia, in-house. In recent years, the HKSAR
Commissioner of Insurance has been promoting the virtues of Hong Kong as an appropriate
location for captives owned by Mainland firms. The same infrastructure and workforce strengths
that attract other types of insurance businesses to Hong Kong are relevant here.
Commodities trading
Buying and selling commodities continues to be central to the economic life of Hong
Kong. The great trading companies of the British era specialized in such activity and much of
Hong Kong’s economic history was shaped by it. So the more recent idea of building new
exchanges to capture more of the global commodities trading business, as well as to develop new
kinds of commodity futures instruments, is hardly radical. The Chinese Gold & Silver
Exchange, for example, has been in existence in Hong Kong for more than a century. Its current
plans call for initiating trading in gold contracts denominated in RMB, the first of their kind
55 HKSAR Census & Statistics Department, Report on Hong Kong Trade in Services Statistics.
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