Hong Kong: Challenging Years Ahead for the Insurance Industry

    Hong Kong has one of the most developed and competitive insurance markets in Asia. Commentators observe that Hong Kong is over-serviced by insurance companies and market shares are unusually diffuse: in 2011, for example, the top insurer had a market share of only 8.3%, while the top five had a market share of just 30.9%.

    As at 31 December 2012, there were 155 insurers authorised in Hong Kong. Of these insurers, approximately 60% were general insurers, 28% were life insurers and 12% were composite insurers. According to the figures released by the Hong Kong Insurance Authority, total gross premiums for insurance business in 2011 increased 14% year-on-year to US$30.4 billion. For general business, accident and health (27%), property damage (23%), general liability (23%) and motor vehicle (10%) business were the major lines of business in terms of gross premiums for 2011. For long term business, individual life business (94%) was the most important line in terms of office premiums for 2011, followed by retirement scheme management (4%).

    Besides responding to a prolonged uncertain economic environment, over the next two years, the Hong Kong insurance industry will also need to cope with various regulatory changes that could increase the operating costs of insurance companies, including the makeover of the Insurance Authority into an independent supervisory body; a review of the Insurance Companies Ordinance (Cap.41); the establishment of a policyholder's protection fund; the introduction of a risk-based capital system; and the introduction of a standardized and government-subsidized private medical insurance product known as the Health Protection Scheme. As a result of the increased cost burden, smaller domestic companies might be driven out of the market while multinational branch operations may no longer be practical.

    Nonetheless, being a leading insurance centre in Asia, Hong Kong continues to attract new foreign insurers, particularly those writing specialty lines, for example, Starr International, Allied World Assurance Company, AXA Corporate Solutions and Allianz Global Corporate & Specialty. Singapore-based personal lines insurer Direct Asia has also recently set up a direct writing operation in Hong Kong.

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