Hong Kong is concerned that it has been losing reinsurance business, as it faces considerable competition both from the region and world in areas such as reinsurance, marine insurance and captive business.
A new report from Hong Kong’s Financial Services Development Council (FSDC) notes that reinsurance is crucial for Hong Kong’s position as a financial centre and as a “super-connector” in the Belt and Road Initiative.
Chairman of the FSDC, Mrs Laura M Cha, explained; “The recent departure and downsizing of the Hong Kong offices of various international insurance and reinsurance companies highlights the need for Hong Kong to further develop our insurance and reinsurance industry. Further departures are likely in the near future if action is not taken.
“Hong Kong has all the necessary ingredients to be a leading insurance and reinsurance hub in Asia. Hong Kong insurers and reinsurers have played a critical role in supporting Mainland Chinese companies to transfer and manage their risks, particularly as they expand into new territories, specifically in the regions in the Belt and Road Initiative. Mainland Chinese companies and insurers will be able to take advantage of the benefits in terms of efficiency, best practices, language and ease of doing business by transacting reinsurance in Hong Kong.”
The report makes a number of recommendations for boosting Hong Kong’s position in the reinsurance market.
It advises a review of policy related to the China Risk Oriented Solvency System (C-ROSS), the implementation of a potential tax incentive scheme to make doing reinsurance business more attractive in Hong Kong, and updating the re/insurance regulatory framework to make it at least comparable with other domiciles.
Hong Kong’s position as Asia’s reinsurance centre was lost to Singapore after 1997, the FSDC explains. Now it faces threats from China’s desire to onshore a significant amount of reinsurance required by its insurers, as well as from brokers diverting reinsurance business to hubs such as Singapore, where economies of scale and tax benefits matter.
Additionally, extra effort needs to be put into promoting Hong Kong as a reinsurance hub and market, the FSDC believes, and the Council hopes to encourage the government there to put more money and effort behind marketing of its financial market.