Beijing's ambition to turn Hong Kong into a yuan hub is spurring Hong Kong insurance companies to issue more yuan-denominated life policies - but they want greater access to the mainland market as well. Vice-Premier Li Keqiang last month announced a range of measures to boost the city's yuan business, and promised to make it easier for Hong Kong insurers to set up operations on the mainland, but did not give details. Currently, only insurance companies with at least US$5 billion in total assets are allowed to set up joint venture insurance companies on the mainland. That largely rules out most Hong Kong insurers, who say they should also be able to conduct business across the border. 'If Hong Kong insurance companies with a lower capital requirement were allowed to set up promotional or agency offices in Guangdong or other parts of China, it would be very helpful to our business expansion,' Chan Kin-por, a legislator for the insurance sector told The South China Morning Post. The Financial Services and Treasury Bureau (FSTB) plans to accompany the Hong Kong Federation of Insurers to Beijing later this year to lobby for more opening up of the mainland market. Hong Kong insurers say they need to be able to invest in mainland equities and bonds so they can offer clients a better return on policies. AXA Hong Kong chief executive Stuart Harrison said any sign of opening up to the Hong Kong insurance sector was welcome. In 1999, AXA established the joint venture AXA Minmetals Assurance in China, and launched yuan-denominated insurance products in Hong Kong last year. Now that there are more yuandenominated products, 'we will continue to look at ways to redefine our product mix to ensure that they are in line with market needs,' Harrison said. 'We do not rule out the possibility of additional yuan products if there is demand.' The yuan is not yet fully convertible but since mid-2009 Beijing has been moving to gradually internationalise it. It allows selected companies to settle cross-border trades in yuan, and last July permitted yuan transfers between bank accounts, paving the way for a flood of yuandenominated investment products, including insurance policies. Yuan policies are popular in Hong Kong, with 10 insurers launching yuan-denominated policies worth 4.4 billion yuan so far this year. Alex Chu Wing-yiu, chairman of the Hong Kong Federation of Insurers, said investors liked yuan policies, as they thought the yuan would continue to gain against the US dollar. He added, however, that Hong Kong insurance companies now mainly issue short-term yuan insurance products such as five-year or 10-year life policies, as it was difficult to find longer-term yuan-denominated investment products. The product range is also limited, with a slew of dim sum bonds - yuan-denominated bonds issued in Hong Kong - but no yuan shares except for a yuan real estate investment trust launched in April. Insurers in Hong Kong complain that they cannot find appropriate yuan investment products in Hong Kong and are not allowed to buy mainland stocks or bonds. However, Vice-Premier Li hinted last month that the Beijing would relax foreign direct investment rules so foreign firms could invest yuan directly into mainland projects instead of having to use US dollars. The government has also set a new quota of 25 billion yuan for non-financial companies to issue dim sum bonds in Hong Kong this year. 'These measures will encourage more companies to issue yuan bonds and yuan shares in Hong Kong. This will widen the investment choices for the local insurers so they can offer investors a higher return on yuan policies,' Chu said. Choy Chung-foo, chief executive of BOC Group Life, said he would like Hong Kong insurers to be able to invest in the mainland bond market. If that were allowed, 'we could achieve a higher return for Hong Kong policyholders', Choy said. 'We can also provide more stable funding. This is a win-win situation.'' At present, US and Hong Kong dollar life policies can offer a return of about 4 per cent because of the wider range of US and Hong Kong-dollar denominated bonds and shares. In contrast, yuan policies only offer an annual return of 1 to 2 per cent. Manulife (International) executive vice-president and chief executive Michael Huddart predicts that yuan-denominated products will account for 25 to 30 per cent of Manulife Hong Kong's premiums and deposits in five years' time. 'Manulife is an active participant in the yuan-denominated investment market,' Huddart said. 'Vice-Premier Li Keqiang has reaffirmed Hong Kong's position as the centre for offshore yuan investments. Although the details have not been announced yet, we anticipate more and more yuan investments to be launched in the market in the future.' Looking ahead, Huddart said the key issue would be for the mainland to open up more to give foreign insurers access to long-term yuan securities and mainland bond markets.