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Following are the opening remarks by the Permanent Secretary for Financial Services and the Treasury (Financial Services), Miss Au King-chi, at the workshop on captive insurance at the Asian Financial Forum 2014 today (January 14):
Good afternoon, ladies and gentlemen.
Welcome to this workshop on captive insurance co-organised by the Government and the Hong Kong Federation of Insurers.
Hong Kong is one of the most open insurance centres in the world, with 155 authorised insurers. With an insurance penetration rate of 12.4 per cent in 2012, Hong Kong is also ranked among the top in the Asia-Pacific Region. We aim to promote the development of captive insurance in Hong Kong to broaden our insurance market.
Put simply, captive insurance is self-insurance where a company is formed to insure the risk of its parent company. It is a financial innovation with a history of about 60 years. There are about 6,000 "captives" worldwide. About 90 per cent of Fortune 500 companies have been using captive insurance for better risk management. While widely adopted by multinational corporations in the US and Europe, captive insurance is relatively underutilised in Asia. That is why we had the idea of organising this workshop during the Asian Financial Forum. We hope to put the spotlight on insurance and stimulate more discussions on captive insurance in Hong Kong.
When we come to think of it, captive insurance is an interesting paradox in at least two aspects.
First, through captive insurance, the policyholder owns the insurer. The insurer is therefore captive to its policyholder. That explains how "captive insurance" got its name.
Secondly, insurance is about externalising risk. But captive insurance means the policyholding parent company is internalising its risk. To manage the risk, a captive insurer often transfers the risk through reinsurance. Therefore, captive insurance and reinsurance are closely linked. And this makes reinsurers' participation in a workshop on captive insurance most relevant. This afternoon we are delighted to have, as our panellists, Mr Franz Hahn from Peak Reinsurance, alongside Mr James Wong from Aon and Mr Ros Lam, Assistant Commissioner of Insurance. We are also honoured to have Mr Nick Cousins from JLT to moderate the discussion.
The Government has renewed its efforts to broaden Hong Kong's insurance market. In particular, we are introducing measures to promote Hong Kong as a domicile of captive insurers. To this end, we are delighted that the Central People's Government is encouraging Mainland enterprises to set up captives in Hong Kong so as to enhance their risk management. Alongside this national policy, we are amending our tax law to cut the profits tax of the business of offshore risks of captives by half, starting from the current tax assessment year of 2013-2014. But tax concessions alone are not adequate for our purpose. I hope the discussion this afternoon will shed light on how corporations can leverage captives to optimise their risk management; and on what the Government may do more to bring our captive business to its next level.
Without further ado, I now pass the stage to our distinguished panelists. Thank you very much.
Ends/Tuesday, January 14, 2014
Issued at HKT 17:43
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