The Hong Kong government will introduce a number of tax incentives to promote reinsurance, marine insurance, and specialty insurance as the city aims to become a regional risk management centre, according to the South China Morning Post (SCMP).
Financial Secretary Paul Chan Mo-po said the incentives were in response to the rising demand for re/insurance relating to the US $1.7 trillion worth of infrastructure projects under development in Asia until 2030.
Speaking at the HKFI 30 Symposium, Chan said: “We are also exploring further tax incentives and regulatory changes to spur the development of marine insurance, specialty insurance and reinsurance in Hong Kong. We will soon consult the industry on these new measures.”
While he did not provide further details about the tax structure, SCMP noted that a report by the Financial Services Development Council (FSDC) last year recommended that Hong Kong introduce the incentives to compete with Singapore as a hub for reinsurance.
“Singapore is offering a 10 percent tax rate to insurers for writing both onshore and offshore marine hull and liability risks,” the FSDC’s report stated. “These incentives proved to be one of the success factors attracting international marine insurers and brokers to set up their businesses in Singapore.”
The report continued: “Hong Kong should consider introducing tax incentives to encourage direct insurers, reinsurers and brokers to establish or expand their presence in Hong Kong, and to place itself in a level playing field with other competitors in this region.”
Chan also said that the Hong Kong Insurance Authority had reached an agreement with the China Banking and Insurance Regulatory Commission (CBIRC) to allow Hong Kong based reinsurers to underwrite insurance business on the mainland.
China’s reinsurance market was valued at HK $273 billion (US $34.78 billion) in 2013 and is expected to reach up to HK $1.54 trillion by 2020, according to SCMP.
Chan added that Hong Kong may also consider expanding planned tax incentives for deferred annuity schemes, stating: “I know the industry is asking for a maximum tax deductible limit higher than the proposed level of $36,000 per year. We will definitely consider the views of the industry when we finalise our proposal.”
“As we can see, more people are starting to look for different financial tools for saving early and saving more for their retirement,” he continued. “It remains our target to introduce the tax deduction in the 2019-2020 year of assessment.”
Speaking with SCMP at the HKFI 30 Symposium, Bernard Chan, Executive Councillor and Head of Asia Insurance, also commented on the proposed tax incentives: “Hong Kong has a big shipping and port business, but our marine insurance has lost out to Singapore and London. A tax incentive will help Hong Kong to attract some of these providers.
“But a tax incentive alone is not enough. Singapore has been very successful in providing training and other support to establish an ecosystem for the marine insurance industry. Hong Kong needs to provide more education and other measures to build up the industry.”