PBOC tightens restrictions on cross-border electronic payments for some HK investment products

PUBLISHED : Monday, 14 March, 2016, 6:37pm
UPDATED : Monday, 14 March, 2016, 6:37pm

Beijing’s latest move for additional restrictions on the use of electronic payment services to buy overseas insurance products will hurt policy sales in Hong Kong.

The People’s Bank of China from Saturday banned cross border use of electronic payment services such as Allinpay and Guangzhou UnionPay to buy life insurance or investment-linked policies

However, the use these platforms will be permitted for the purchase of overseas insurance policies covering personal accidents, medical and transportation, with a cap of 30,000 yuan, according to a report by Bloomberg.

Credit Suisse analyst Charles Zhou said the new policy has limited impact as the new measures follow the same spirit as the first US$5,000 cap set by UnionPay last month, targeting jumbo size insurance policy payments.

“The electronic payment services, such as Guangzhou UnionPay cross-border payment, are primarily used to purchase jumbo-sized policies, due to its higher limit of up to HK$1 million with seven banks in co-operation,” Zhou said.

An insurance sales agent who requested not to be named, said the new measures will affect insurance sales in Hong Kong, particularly the single premium policies which require policyholders to pay the premium all at once instead of through instalments.

“Many mainlanders like to buy single premium policy as an investment product. The new rule would hurt overall sales of the local insurance industry,’” he said.

According to government statistics, the premiums from mainlanders purchasing life insurance policies in Hong Kong hit HK$21.1 billion in the first nine months of last year, representing 21.7 per cent of new premiums from all new policy sales. That was up sharply from HK$3 billion or 6.4 per cent of all new policy sales in 2009.

“The mainlanders who have businesses and bank accounts in Hong Kong would not be affected by the new rules. In addition, there are many mainlanders who are buying smaller-sized policies under 30,000 yuan would not be affected,” he added.

The new restriction dragged on the shares of insurance companies during Monday’s session. Shares of AIA, the largest insurer in Hong Kong, fell 0.81 per cent to close at HK$42.65, in contrast to a 1.17 per cent rise in the Hang Seng Index.

Credit Suisse’s Charles Zhou said the impact upon AIA would be limited. Insurance purchases by mainlanders in Hong Kong represents less than 35 per cent of total AIA policy sales in the city. Meanwhile the single pay insurance which would require large fund transfers accounts for 10 per cent of AIA’s policy sales in Hong Kong and less than 1 per cent of AIA Group as a whole.

“Eighty per cent of remaining regular pay policies in AIA HK are on average below the US$5,000 limit,” Zhou said.