Expectations of an appreciating yuan has spread to the insurance sector as policyholders seek out yuan-denominated policies.
HSBC has become the latest insurer to rush to launch a yuan insurance product with a 10-year saving insurance plan denominated in yuan. Citibank and its partner MetLife have already introduced a five-year yuan insurance policy while China Life Hong Kong branch and BOC Life have launched similar products in the past few months. Others such as Manulife, Fubon Bank (Hong Kong) and MassMutual Asia are expected to follow suit.
HSBC's 10-year policy is denominated in yuan but policyholders can pay premiums and collect benefits in Hong Kong dollars upon the policyholder's death or when the policies expire. The amount of Hong Kong dollars received by the policyholders will be dependent on the exchange rate of yuan at the time of settlement. Policyholders can be guaranteed to get back 115 per cent of the premium paid when the policy expires in 10 year's time but if the yuan gains in value over that time, then policyholders gain the benefit of appreciation.
Jason Sadler, managing director of HSBC Insurance Hong Kong, said yuan insurance plans would become popular as more and more customers want products that would allow them to capture the growing economy of mainland China.
'We expect market sentiment for yuan products to remain favourable,' Sadler said. 'Total yuan deposits in Hong Kong were up 15 per cent to 62.7 billion yuan (HK$71.2 billion) last year. We expect this new yuan savings plan to help customers diversify their savings pool and capture new opportunities to grow their wealth.'
At present, there are around 8 million insurance policies in the city with most either denominated in Hong Kong dollars or US dollars. Insurance companies began to launch yuan policies at the end of last year on expectations that the yuan will gain by 5 per cent this year. Chan Kin-por, the legislator for the insurance sector, said more insurers were expected to introduce yuan policies. 'Many customers are betting on the rising trend of the yuan over the next few years,' Chan said. 'Buying a yuan insurance policy is a way to invest in the valuation gain of the currency.'