Yuan life insurance products are expected to be a focus for the city's insurance market, but the limited range of investment options mean they will still be outsold by US and Hong Kong dollar-denominated policies, said David Fried, the global insurance head of HSBC Holdings.
Most of the 8.7 million life insurance policies in Hong Kong are denominated in either US or Hong Kong dollars. But yuan insurance policies have now made an appearance. HSBC, Bank of China Life, Fubon Bank (Hong Kong) and other lenders and insurers decided to offer yuan policies earlier this year.
These policies are in demand with policyholders who are betting on the yuan to continue to appreciate. It has gained 20 per cent against the US dollar since 2004, and many believe it will rise a further 3 per cent this year.
Fried said the bank would continue to introduce yuan insurance products, within limits. 'Yuan policies are likely to continue to be popular, but it is hard for us to issue enough policies to meet all the demand,' he said.
There were still not many yuan bonds or yuan shares available in the market, making it hard for banks and insurers to invest their premium income, he said.
For that reason, US dollar and Hong Kong dollar policies would continue to be the major segment of the local insurance market.
Fried was optimistic that the bank's overall insurance business would continue to grow in the second half of this year. HSBC recorded US$1.6 billion in pre-tax profit for its insurance business, representing 17 per cent of the lender's total. Asia represents 52 per cent of all sales, with the rest coming from Latin America, the Middle East, Britain and Europe.