IA targets growth with new capital rules and industry expansion
IA targets growth with new capital rules and industry expansion | Insurance Business Asia
Insurance News
IA targets growth with new capital rules and industry expansion
Changes highlight Hong Kong’s role as “super-connector”
Insurance News
By
Roxanne Libatique
The Hong Kong Insurance Authority (IA) has voiced its support for the 2024 Policy Address presented by its chief executive on October 16, which introduced several measures aimed at bolstering the insurance industry and strengthening Hong Kong’s role as a global risk management centre.
The address underscored Hong Kong’s position as a “super-connector” between Mainland China and international markets.
Setting up captive insurance entities in Hong Kong
IA chairman Stephen Yiu highlighted the regulator’s efforts to help businesses enhance their risk management practices, with a particular focus on attracting large onshore and offshore corporations to set up captive insurance entities in Hong Kong.
“The IA will actively support enterprises in strengthening their risk management capabilities, focusing on attracting sizeable onshore and offshore corporations to set up captives and pursuing with the China Export & Credit Insurance Corporation (Sinosure) to set up businesses in Hong Kong. We will also explore ways to broaden the range of marine insurance products and services,” he said.
Risk-Based Capital regime
Another key initiative in the Policy Address is the planned review of the Risk-based Capital (RBC) regime in 2025.
The new regime, which replaces the previous ordinance-based system, introduces a structure that focuses on quantitative, qualitative, and disclosure requirements for insurers.
According to AM Best, the solvency ratios under the new RBC rules are roughly half of those observed under the prior system, especially for companies rated by the agency.
Christie Lee, AM Best’s senior director of analytics, noted that insurers have been gradually adapting their investment and business models to optimise capital usage under the new framework.
Additionally, the updated disclosure requirements are expected to improve transparency across the sector, but some smaller insurers are facing pressure from the added management costs.
Yiu stated that the IA aims to align capital requirements with the goal of encouraging insurers to invest in local infrastructure projects, supporting economic development through risk diversification.
“The direction in mind includes incentivising insurers to invest in local infrastructure projects for their risk diversification and supporting long-term economic development through adjusting capital requirements,” he said.
He said the IA will engage closely with industry participants to ensure alignment on these changes.
New working group focusing on “silver economy”
In addition to regulatory updates, Yiu also acknowledged the government’s initiative to create a working group focused on the “silver economy,” driven by the challenges posed by Hong Kong’s aging population.
The insurance sector, Yiu noted, can play a vital role in addressing protection gaps and supporting healthcare and elderly services, particularly as part of coordinated efforts in the Guangdong-Hong Kong-Macao Greater Bay Area.
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