Tax incentives on the way to help promote insurance sector, Financial Secretary says
The Hong Kong government will introduce a number of tax incentives to promote marine insurance, reinsurance and specialty insurance as the city battles to become a regional risk management centre, according to Financial Secretary Paul Chan Mo-po.
Chan said the timing was right to promote the insurance industry as he expects rising demand for the US$1.7 trillion worth of infrastructure projects under development in Asia from now until 2030.
“We are also exploring further tax incentives and regulatory changes to spur the development of marine insurance, specialty insurance and reinsurance in Hong Kong. We will soon consult the industry on these new measures,” Chan said in a speech on Tuesday to hundreds of insurance executives at the HKFI 30 Symposium.
Chan did not provide details on the tax incentive structure. However, a report by the Financial Services Development Council last year recommended the incentives to help Hong Kong close the gap with Singapore as a hub for reinsurance, captive insurance and marine insurance.
The FSDC said Hong Kong can follow Singapore’s example of extending tax incentives to insurers writing marine coverage to build up market volume.
“Singapore is offering a 10 per tax rate to insurers for writing both onshore and offshore marine hull and liability risks. These incentives proved to be one of the success factors attracting international marine insurers and brokers to set up their businesses in Singapore. Hong Kong should consider introducing tax incentives to encourage direct insurers, reinsurers and brokers to establish or expand their presence in Hong Kong, and to place itself in a level playing field with other competitors in this region,” the FSDC report said.
Chan also said the Hong Kong Insurance Authority recently had reached an agreement with the China Banking and Insurance Regulatory Commission to allow Hong Kong based reinsurers to underwrite insurance business on the mainland.
China’s reinsurance market was valued at HK$273 billion (US$34.78 billion) in 2013 and is expected to reach up to HK$1.54 trillion by 2020.
Chan also said he would consider expanding planned tax incentives for deferred annuity schemes, which are pension schemes provided by insurance companies.
“I know the industry is asking for a maximum tax deductible limit higher than the proposed level of $36,000 per year,” Chan said. “We will definitely consider the views of the industry when we finalise our proposal.”
“As we can see, more people are starting to look for different financial tools for saving early and saving more for their retirement. It remains our target to introduce the tax deduction in the 2019-2020 year of assessment.”
Bernard Chan, executive councillor and head of Asia Insurance, supported the proposed tax incentive to promote marine insurance.
“Hong Kong has a big shipping and port business, but our marine insurance has lost out to Singapore and London. A tax incentive will help Hong Kong to attract some of these providers,” Chan told the Post at the sidelines of the symposium.
“But a tax incentive alone is not enough. Singapore has been very successful in providing training and other support to establish an ecosystem for the marine insurance industry. Hong Kong needs to provide more education and other measures to build up the industry.”