The insurance industry of Hong Kong plays an instrumental role in making Hong Kong a world-class financial centre. The total gross premiums of the insurance industry in 2023 amounted to US$69.5 billion, with an average growth rate of 1.1% over the past five years. In 2023, the insurance density and insurance penetration of Hong Kong insurance market were around US$8,769 and 17.2%, respectively ranked second and first among economies in the world.
Hong Kong strives to expand its role as a regional insurance hub and a global risk management centre by leveraging on opportunities arising from the Belt and Road Initiative and the development of the Greater Bay Area.
The Government works closely with the Insurance Authority (“IA”), the independent regulator of the Hong Kong insurance industry, to enhance the competitiveness of the industry and help the industry seize new business opportunities.
Recently, some notable market development initiatives in support of this goal include introducing profits tax concession for insurers and broker companies underwriting marine and specialty insurance, expanding the scope of insurable risk for captives and launching a bespoke regulatory regime and a subsidy scheme to facilitate the issuance of insurance-linked securities in Hong Kong.
We are also committed to modernizing our regulatory framework to benchmark with international standards. Some major developments in recent years include establishing the independent IA in December 2015 to regulate and promote sustainable development of the insurance industry, as well as implementing a legal framework to enhance the regulation of insurance groups in March 2021. Looking ahead, we will implement a Risk-based Capital regime to replace the existing rule-based capital adequacy regime, and establish a Policy Holders’ Protection Scheme to provide policy holders with a safety net in the event of insurer insolvency.
Risk-based Capital regime
To align Hong Kong’s regulatory regime with international standards and ensure financial stability, we plan to establish an RBC regime which will make capital requirements more sensitive to the level of risk borne by insurance companies. Together with IA, we have maintained close contact with the industry in undertaking preparatory work, including conducting three rounds of Quantitative Impact Studies to collect data for assessing the outcome on the solvency level of insurers.
Policy Holders’ Protection Scheme
To better protect insurance policy holders’ interest and maintain market stability in the event of insurer insolvency, we plan to establish a PPS to provide a safety net for policyholders in case an insurer becomes insolvent. Together with IA, we have maintained close contact with the industry in undertaking preparatory work, including conducting a consultancy study to update the key parameters of the PPS (e.g. target fund sizes and lead time for accumulation).
For more information, please visit the following websites:
Insurance Authority
https://www.ia.org.hk/en/index.html