Hong Kong insurance sector can play key role as global connector with China
- The provision of services essential to the management of business risk at a regional level can only bolster city’s status as an international financial hub
If Hong Kong wants to bolster its status as a global financial hub it needs to aim at regional pre-eminence in the provision of related services essential to the management of business risk. Key among them is insurance.
It is already an integral part of Hong Kong’s economy, but there is room for more coverage of supply chain risks. Hopefully that will be remedied under a road map for further development of the local industry unveiled by Chief Executive John Lee Ka-chiu at the recent Asian Insurance Forum in Hong Kong.
It focuses on making the city the insurance hub for the Greater Bay Area innovation cluster of 11 cities including Hong Kong, the Belt and Road Initiative and for projects related to climate change.
It comes down to competition with Singapore, the city’s only rival as a regional insurance hub, and involves a wide range of measures, including tax incentives and regulatory reforms, to lure more international insurers to set up headquarters in the city. Lee said 12 of the world’s top 20 insurance firms had based regional operations in the city, which has 164 companies offering life and general insurance, compared with 124 in Singapore.
However, if captive insurers – those set up by companies to manage in-house risks otherwise uninsured by existing insurers – are included, Singapore has 206 insurers. Hong Kong has only a few captive insurers.
Insurance is a critical part of risk management and financial infrastructure in any market-forces society – more so in Hong Kong’s role as a connector to mainland China. For example, if a manufacturing process based on the mainland is disrupted, say by Covid control measures, there are few general insurance policies to cover this at present.
So companies need to set up subsidiaries with an insurance licence to cover supply chains. Singapore remains the Asian hub for this product.
Hong Kong wants to catch up by 2050.
Development as a regional insurance centre is part of Hong Kong’s repositioning as a global connector to the mainland economy, especially the Belt and Road Initiative and the Greater Bay Area. This role was also the focus of a recent “one country, two systems” and Belt and Road international law conference organised by the Hong Kong Basic Law Education Association.
Hong Kong to unveil insurance industry road map to bolster global hub status
Beijing officials urged the city to leverage its common law heritage and globally recognised system, including dispute resolution, to contribute to the initiative.
Failure to do so would be a missed unique opportunity. As Hong Kong liaison office deputy director Chen Dong pointed out, the city is China’s only common law jurisdiction, making it a connector between Beijing and belt and road partners that have similar legal systems, of which there are more than 20.
Insurance may not set the pulses racing like deal-making and risk-taking, but it can underpin Hong Kong’s future as a financial hub and global connector to China.
