With its pivotal role in connecting with China and the Greater Bay Area, Hong Kong has the potential to surpass major global financial centres such as London, Tokyo, and Singapore and establish itself as a leading international insurance hub, claims a new report by the South China Morning Post.

According to industry experts, the city is currently home to over 160 insurance companies, which are eager to offer insurance coverage to mainland Chinese companies and visitors.

During a conference held on Tuesday, speakers highlighted the advantageous position of Hong Kong as an emerging insurance centre. Patrick Graham, CEO of Manulife for Hong Kong and Macau, said the city’s strong fundamentals, including the rule of law, low taxation, proximity to mainland China, world-class infrastructure, and a skilled workforce. Graham also commended the Hong Kong government’s roadmap, which sets the stage for the city to become a global risk management centre.

Hong Kong’s insurtech market is scaling rapidly

With its well-established insurance market, Hong Kong has attracted more than 160 global insurance companies that seek to conduct business with clients based in mainland China. Moreover, the city has experienced significant growth in insurance sales to mainland Chinese visitors, who are known for their substantial investment in Hong Kong insurance policies.

Orchis Li, Chairwoman of the Hong Kong Federation of Insurers (HKFI) and General Manager of General Reinsurance Hong Kong Branch, highlighted Hong Kong’s strategic position as a connector between China and the rest of the world. Li stated, “As long as globalisation continues, we have a unique position to assist both sides.”

Manulife, Canada’s largest insurance company, has chosen Hong Kong as its regional headquarters for managing its operations across 14 markets in Asia. Wilton Kee, Chief Financial Officer of Manulife Hong Kong and Macau, cited the city’s ideal location and abundant talent pool as key factors in the decision.

Hong Kong currently ranks as the second-largest domestic insurance market globally, driven by local demand for insurance products. However, the city has faced challenges in attracting insurance companies to establish their presence due to tax-related reasons, with Bermuda emerging as a preferred alternative. Nevertheless, the recent elimination of the Hong Kong estate duty and other regulatory changes are expected to make the city more attractive to insurers.

Underserved HK market provides new opportunities for insurtechs

The underserved market and substantial growth potential in the Greater Bay Area have also caught the attention of insurers. The nine mainland cities within the Greater Bay Area have an insurance penetration rate of only 5.5%, significantly lower than Hong Kong’s rate of 19.2%. This indicates ample business opportunities in life insurance, medical insurance, and retirement planning.

MM Lee, head of the technical expert team of the Insurance Authority, said the need for Hong Kong to control employee costs and enhance its talent pool to stay ahead of the competition. Lee acknowledged that the operating and distribution costs in places like London are excessively high and urged Hong Kong to remain competitive. Lee expressed optimism about the life insurance market and stated that the Insurance Authority would focus on improving sales practices and providing public education on insurance to sustain the market’s positive momentum.

In December, Chief Executive John Lee Ka-chiu announced the government’s intention to introduce additional policies aimed at attracting global insurers to use Hong Kong as a hub for expanding their operations in Asia. The reopening of the border in January resulted in a substantial increase in insurance sales in Hong Kong as mainland Chinese customers returned to purchase insurance products.

The future of Hong Kong’s insurance industry looks promising, fuelled by its strategic positioning, well-established market, and efforts to enhance its attractiveness to insurers. With continued support from the government and industry stakeholders, Hong Kong aims to cement its status as a leading international insurance hub and contribute significantly to the region’s financial landscape.

Source: South China Morning Post