With the wheels of development in full gear in the Guangdong-Hong Kong-Macao Greater Bay Area, Hong Kong’s insurers are lining up to serve the population of more than 70 million in one of the world’s most vibrant economic powerhouses that’s now taking shape.
Their role is part of the mission to help realize a quality of life for people living, working and traveling in the 11-city cluster. Insurance services will play a significant part in supporting people’s mobility, presenting vast opportunities for the industry in the area.
More than a year after the grand development blueprint for the Bay Area was unveiled, the region’s openness, through finance and trade, as well as the interconnectivity between the nine Guangdong cities and two special administrative regions, is surging ahead.
From the huge infrastructure projects, such as the Hong Kong-Zhuhai-Macao Bridge, to a string of financial market connect programs linking up the capital markets, the Bay Area, as one of China’s most economically developed regions, has been ramping up coordinated development in financial services.
The country’s four key financial market regulators — the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the People’s Bank of China and the State Administration of Foreign Exchange — jointly put forward the Opinions on Providing Financial Support for the Development of the Greater Bay Area in May, injecting a fresh impetus into the Bay Area’s development.
The regulators agreed to further expand opening up of the region’s insurance business by supporting Hong Kong and Macao insurance enterprises in setting up service centers in the nine mainland cities involved in the development.
They also encouraged the establishment of foreign-owned insurance and reinsurance companies, insurance agencies and assessment companies in the nine mainland cities.
“The document reaffirms and builds upon the Outline Development Plan, and also updates the broader definition to the evolving vision of the Bay Area. It presents a wide range of opportunities for the insurance industry,” said Billy Wong, financial services partner at PwC Hong Kong. “There has been a significant amount of discussions in the insurance sector about the visions of how the Bay Area opportunities may evolve in the insurance field, and also about how insurers can best position themselves to grasp the opportunities.”
Edward Moncreiffe, Hong Kong CEO of HSBC Life, a life insurer in Hong Kong owned by HSBC, said, “The latest announcements on the development of the Bay Area will further strengthen Hong Kong’s role as a regional insurance hub while allowing customers in the region to be better served.”
There’s a much stronger demand for more-diversified products and professional services with the growth of wealth and the increasing awareness of protection and health on the mainland, he said. In this regard, he believes that insurers in Hong Kong are well placed given the maturity of the industry, coupled with the high standard of professional insurance talents they possess.
In a latest report titled “Financial Services in the Greater Bay Area: Developing a GBA Mindset” by PwC Hong Kong, senior executives of insurance companies agreed there’s a great demand for cross-border insurance products. They said it’s worth focusing on the Bay Area as it’s “a large but achievable prize”. “We’ve also seen an increasing level of collaboration between Hong Kong insurers and other institutions in the Bay Area; for example, Hong Kong insurers forming working relationships with hospitals, medical services providers and technology firms in the Bay Area,” Wong said.
In July, Heng An Standard Life Insurance Co — a joint venture between investment company Standard Life Aberdeen in the United Kingdom and a State-owned financial services enterprise — completed the acquisition of Standard Life Asia owned by SLA.
Heng An said the acquisition will further enhance its distribution channel with Standard Life Asia’s solid ground in Hong Kong. “Exploring the opportunities of the ‘Insurance Connect’ in the Bay Area is also a key part of our expansion plan,” said Olivia Liu, Standard Life Asia’s new chief executive.
Following the transaction, Heng An became the only mainland company with an overseas insurance license serving both the mainland and Hong Kong clients.
HSBC Life is also targeting the Bay Area to capitalize on the growth that can be expected to arise from a more-connected population of 70 million, with its insurance capability and integrated access to banking and payment solutions on both sides of the boundary.
In May, HSBC Insurance Asia announced it would acquire remaining 50 percent equity interest in HSBC Life China, its life insurance joint venture, from National Trust. The transaction will support HSBC’s ambition to accelerate growth in the Bay Area, where it fully intends to expand in all lines of businesses, according to HSBC.
Hong Kong insurer FTLife, owned by NWS Holdings — the conglomerate flagship of New World Development — said the company has been aware of the huge potential the Bay Area presents for the insurance sector as the company actively expands its footprint in the region. The insurer told China Daily it welcomes measures that could offer more cross-boundary insurance products and services in the region.
According to data from the Hong Kong Financial Services Development Council, the insurance penetration rate in Hong Kong is around 18 percent of GDP, while in the other nine mainland cities of the Bay Area, the penetration rate is less than half of Hong Kong’s, which indicates huge potential in the insurance industry. Last year, Taiping Life Insurance and Hengqin Life Insurance rolled out two types of medical insurance products for people moving around the Bay Area. As the demand for insurance soars, insurance practitioners in the region have been exploring customized and targeted insurance products and services with the support of favorable policies.
The four regulators’ document also specifically mentioned improving the cross-boundary motor-vehicle insurance system to facilitate physical movement.
With a comprehensive transport system in the region, Wong said it’s essential that insurers can provide cross-boundary motor-vehicle insurance that could be covered in Hong Kong, Macao and on the mainland.
However, the road ahead remains fraught with challenges. There are multiple financial regimes in the region — including currencies, banking regulations and insurance regulations — that require collective efforts by all stakeholders by stages, Wong said.
The creation of insurance service centers in mainland cities in the Bay Area was again highlighted in the May paper. Industry leaders say that individuals holding Hong Kong or Macao insurance policies and living or working in the Bay Area could enjoy services such as payment of premiums, renewals and claims processing at service centers.
John Chan, financial services tax partner at PwC, pointed out that service centers would definitely create some form of tax presence to companies operating on both sides of the boundary. Cross-boundary transactions can potentially create double taxation to taxpayers as they may not be familiar with certain taxation items and tax compliance procedures of the other side, Chan said
“Insurance companies are highly encouraged to assess and understand all potential tax costs when formulating their Bay Area plan. Meanwhile, industry associations may want to take an initiative to discuss with the relevant authorities to address any potential tax hurdles upfront,” he said.
PwC also suggested that authorities, including tax officials, work together to give more certainty, and that ideally would lead to a tax-neutral status for companies participating in the plan. Looking ahead, Hong Kong-based insurers are optimistic about the region’s insurance development. Wong said he expects the Bay Area development plan to further change the region’s insurance landscape, such as in technology, product designs and more mature infrastructure, to support the insurance growth.
