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The Permanent Secretary for Financial Services and the Treasury (Financial Services), Miss Au King-chi, introduced the Hong Kong Special Administrative Region (HKSAR) Government's policy in promoting captive insurance at a seminar held in Beijing today (August 5).
Miss Au said, "Financial co-operation between Hong Kong and the Mainland has all along been implemented in accordance with the 'mutually beneficial' principle."
She pointed out that Hong Kong possesses a highly efficient multi-currency capital formation platform, and has become a premier international financing centre for the Mainland. As Mainland enterprises start to "go global", the HKSAR Government hopes to encourage more of them to leverage the city's advantages to strengthen financial co-operation and development, such as (1) raising capital from international markets by issuing Renminbi (RMB) bonds and listings; (2) carrying out cross-border RMB trade settlement so as to effectively manage foreign exchange risks; (3) setting up captive insurers in order to enhance their risk management; and (4) establishing a treasury business centre in Hong Kong for conducting their global treasury functions.
"On one hand, Mainland enterprises can access world-class risk management services for their offshore business by forming captive insurers in Hong Kong. On the other hand, Hong Kong's insurance market will be broadened, achieving a mutually beneficial result," Miss Au said.
"As many Mainland enterprises are already conducting their financial activities in Hong Kong, there will be synergy if they also set up their captive insurers in Hong Kong. Being proximate to the Mainland and sharing the same culture and language, Hong Kong is better placed than other financial centres in the region to be a domicile for captive insurers formed by Mainland enterprises," she added.
Captive insurance is a form of self-insurance in which a company is formed to underwrite exclusively the risk of its parent and other companies in the same group.
The Central People's Government has earlier announced a policy to encourage Mainland enterprises to form captive insurers in Hong Kong to enhance their risk management. To promote the development of captive insurance, the HKSAR Government amended the Inland Revenue Ordinance to cut profits tax of the business of offshore risks of captive insurers by half (i.e. 8.25 per cent) starting from April 1, 2013. The Legislative Council passed the amendment in March this year.
The HKSAR Government hopes to attract more enterprises to set up their captive insurers in Hong Kong through this tax concession as well as our fundamental strengths as an international financial centre, including a simple tax regime, the rule of law, ready supply of talent, free flow of information and capital, and a highly open operating environment.
Also speaking at the seminar, the Acting Assistant Commissioner of Insurance (Policy and Development), Mr Tony Chan, said, "The application process for authorisation of a captive insurer can be completed within three months provided that all the necessary documents are submitted."
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The seminar "Captive insurance business in Hong Kong for Chinese enterprises" was organised by China Taiping Insurance (HK) Co Ltd. Other speakers included the Chief Executive Officer of China Taiping Insurance (HK) Co Ltd, Mr Liu Shi-hong, and the Managing Director of Sinopec Insurance Ltd, Mr Liu Jifeng. About 40 representatives from Mainland central enterprises and large corporations took part in the seminar.
During her stay in Beijing, Miss Au also called on the State-owned Assets Supervision and Administration Commission of the State Council and the China Overseas Development Association for encouraging more Mainland enterprises to make the best use of Hong Kong's financial platform to help them "go global", and to further promote Hong Kong's status as a major RMB offshore centre.
The Office of the Commissioner of Insurance has uploaded the application procedures for authorisation for a captive insurer to operate in Hong Kong (see annex) to its website (www.oci.gov.hk/framework/index08_09.html).
Ends/Tuesday, August 5, 2014
Issued at HKT 18:19
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