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Following is the speech by the Permanent Secretary for Financial Services and the Treasury (Financial Services), Miss Au King-chi, at the Opening Ceremony of the InsuranceCom Management Conference today (December 2):
Dr Schanz, ladies and gentlemen,
Good morning.
I must thank InsuranceCom for choosing Hong Kong again as the venue for its 2nd Asia conference. This conference has drawn the top insurance executives from every corner of the world to Hong Kong. I welcome you all and am happy to join you this morning.
There is an old saying that "needing insurance is like needing a parachute: if it isn't there the first time, chances are you won't be needing it again". Insurance is a necessity, not an option. I am sure the discussions in this conference will generate more ideas on meeting the evolving insurance needs of clients in Asia.
Importance of the financial services sector and insurance business
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Hong Kong has topped the World Economic Forum's Financial Development Index for two consecutive years. We are proud of our excellent infrastructure, simple tax regime, credible regulation and vibrant financial services sector. We are well positioned to be the major financial services provider for businesses in Mainland China and the region.
Hong Kong is one of the most open insurance centres in the world. With more than 150 authorised insurers, including more than half of the world's top 20 insurers, we have recorded more than 60 per cent growth in premiums over the past five years. It is encouraging to see that this small city with 7 million people has achieved an insurance density of US$5,000, ranking first in Asia and sixth globally.
Potential of the Asia-Pacific insurance market
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The Asia-Pacific insurance market has tremendous potential for further development. According to industry data, the total direct insurance premium in the Asia-Pacific region grew from US$1,600 billion in 2003 to US$2,500 billion in 2012. Allow me to share with you two notable trends that are shaping the insurance market.
First, according to a report published by the United Nations Development Programme, Asia-Pacific will comprise two-thirds of the global middle class by 2030. The middle class is known to be more conscientious in planning early for retirement, and has greater demand for health insurance and retirement planning products. Rising Asian affluence has also been generating a greater need for travel insurance. Second, members of our younger generation, who have increasing economic clout, tend to prefer simple products, transparent pricing and quick delivery. This trend has been vividly illustrated by online sales of insurance products on "Singles' Day" in Mainland China this year. For those who may not know, the unique "Singles' Day" in the Mainland falls on November 11 and is synonymous with an online shopping spree. This year, on November 11, an insurer recorded an online sales volume of about US$35 million in a single day. The most popular insurance products were retirement products and vehicle insurance. An innovative insurer also seized the opportunity to promote its insurance coverage for purchases and payments made online, and recorded turnover of 150 million policies on that day.
Establishing a sustainable base for further growth of the insurance industry
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Modernising the regulatory regime
The two trends I have just mentioned shed light on how the insurance market is evolving. The regulatory regime also needs to be updated in tandem to meet these new challenges. In Hong Kong, the Government is setting up an independent insurance authority to enhance policyholder protection and maintain the stability of the insurance industry. The new regulatory regime will provide a modern environment for sustainable development of the industry. It will also bring in a more accountable framework for promoting compliance and enhancing transparency in regulation.
Market development
But that alone will not be adequate. In addition to modernising our regulatory regime, the Government is duty-bound to introduce measures to attract new players, new products and services, and more liquidity to our market, with a view to reinforcing our status as a regional insurance hub. Let me mention some recent efforts. We are providing tax and regulatory concessions, and launching promotional efforts, to encourage more enterprises, especially those from the Mainland, to set up captive insurers in Hong Kong. It would help these enterprises to enhance their risk management. In parallel, it would enrich our insurance industry, and promote other related professional services including reinsurance, accounting, actuarial and legal services.
Hong Kong hosts the largest pool of RMB liquidity outside the Mainland, amounting to over RMB1 trillion, which is able to support a full range of RMB products and financial activities. RMB insurance business, since its introduction in 2010, has become one of the major drivers behind the long-term growth of our insurance industry. There are about 190,000 policies issued with a total premium of close to RMB44 billion (Note). Through the concerted efforts of the Government and the industry, we have sought agreement from the People's Bank of China (PBoC) to allow Hong Kong insurers to participate in the Mainland inter-bank bond market for matching their long-term RMB liabilities. As of today, we are pleased to note that 13 insurers have already obtained the PBoC's approval to conduct such activities. As a gateway for Mainland enterprises to "go global", we are encouraging Mainland insurers to cede reinsurance in RMB in Hong Kong. In doing so, they can better manage their currency risk by minimising currency mismatch between reinsurance and underlying economic activities.
Asset management centre
Hong Kong is Asia's largest asset management centre. Last year, the total assets under management reached a record high of HK$16 trillion with 70 per cent of the funds coming from overseas. To attract more investment funds to domicile in Hong Kong, we shall introduce an open-ended fund company structure through legislation. We shall also extend profits tax exemption to private equity funds, and waive stamp duty for all exchange-traded funds. Indeed, we have the international DNA and appropriate ecosystem to be the preferred location for managing insurance assets. And we shall continue our endeavours in facilitating the growth of this business.
A recent development on this front is the Shanghai-Hong Kong Stock Connect programme launched last month. It seeks to promote the two-way opening up of the capital markets of Hong Kong and the Mainland. Under the Stock Connect programme, investors in Hong Kong may invest directly in 568 Mainland A-shares, and Mainland investors in 266 Hong Kong stocks. Apart from creating synergy for the two stock markets by expanding the sources of investment and boosting their competitiveness, the programme also facilitates the gradual opening of the Mainland's capital account and the internationalisation of RMB as an investment currency for global investors. It will help reinforce Hong Kong's position as a premier offshore RMB hub and an international asset management centre.
Nurturing talent
Professionals and skilled personnel are crucial for the sustainable development and expansion of the insurance sector. We shall step up our efforts to nurture talent for the insurance industry. Specifically, following the last Budget speech, we are working on measures to attract more young people to join the profession. These include publicity drives on financial careers and exposure schemes such as trainee programmes and internship networks in collaboration with the insurers. Also, we are formulating incentives for practitioners to sharpen their professional skills and prepare themselves for senior corporate positions.
Concluding remarks
Ladies and gentlemen, close collaboration between the Government and the industry is essential for the success of the many initiatives I have just outlined. To this end, InsuranceCom offers a most timely platform. I look forward to hearing from our distinguished speakers about the market outlook of the insurance sector and solutions for market innovations. Your advice and support will help strengthen the development of the insurance industry and the underlying real economy it seeks to serve.
I wish you all a most successful conference, and for those coming from across the miles, a most enjoyable stay here.
Thank you very much.
Note: As at end September 2014, the total premium is RMB43.718 billion.
Ends/Tuesday, December 2, 2014
Issued at HKT 09:45
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