Page 17 - WTW Asia Insurance Market Report
P. 17

Hong Kong	

  All lines of business softened at an exceptional speed in                     Guidance Note 16 (GN 16)
  2016, leaving the market the softest it has ever been in
  the past 12 years. The saturated insurance market (161           The Office of the Commissioner of Insurance in Hong Kong
  authorised insurers serving a population of 7.3 million          (OCI) issued a Guidance Note on Underwriting Long Term
  people) contained a substantial amount of capacity due to        Insurance business in order to strengthen policyholder
  fierce competition. In addition, the lack of significant losses  protection for all long term business sold in the region.
  added to the softness of the market. The consolidation of        Effective 1 April 2016 for new products and 1 January
  ACE and Chubb and the acquisition of RSA’s Hong Kong             2017 for new and existing policies of current products,
  and Singapore operations by AWAC in 2015 created a               the purpose of the GN 16 is to promote high standards of
  further influx of funds into the market. The pretext for the     conduct and sound business practices among insurers, as
  latest round of competitive rate-cutting was in response         well as to remove information asymmetry for customers
  to the pricing strategy adopted by Berkshire Hathaway            making purchasing decisions. As this covers a number
  Specialty Insurance, which gained its operating licence          of aspects of an insurance products’ lifecycle, such as
  in Hong Kong in 2015. Competition is particularly intense        pre-sale, sale and post-sale activities, the remuneration of
  in the motor and employees’ compensation lines, both             insurers is likely to be impacted.
  of which are chronically loss-making. One source of
  downward pressure on the market is the uncertain state           Increasing Competition in Health Insurance
  of the economy, which has led many clients to insist on
  a reduction in their insurance overheads. Another is the         As companies invest more in the area of employee health
  simultaneous drying up of construction business in both          and benefits and as consumers display greater interest in
  Hong Kong and Macao, which has left CAR underwriters             health and life insurance, the area of health insurance is
  desperate to meet their budget targets.                          seeing steady growth. Given the vast options consumers
                                                                   have in the marketplace, insurers are finding it increasingly
  Hong Kong’s insurance sector is dominated by a                   difficult to gain a strong foothold over their competition. We
  massive and dynamic life segment, which accounts                 have seen a number of insurers increasing their investment
  for nearly 90% of all premiums written. The growth               in operations and claims support in order to differentiate
  in life insurance premiums is driven by a number of              themselves in terms of quality and speed of service.
  factors, such as the country’s persistent surplus of
  savings, the central role played by life insurance in            Changes in the Regulatory Environment
  organised savings and the increasing demand for
  retirement income solutions in an ageing population.             Over the next three to four years, the regulatory
  Accident and health insurance, which are important               environment is expected to experience the biggest
  business to life and non-life insurers alike, are likely to      shake-up since the 1990s. The Insurance Authority
  see near double-digit rate expansion owing to inflation          (IA) will undergo a change in status to an independent
  in the healthcare sector. As one of the most open                supervisory authority with enhanced powers. Apart from
  and established insurance centres in the world, Hong             this, major developments such as the introduction of a
  Kong is also well positioned to seize opportunities              statutory licensing regime and new conduct standards
  arising from the adoption of FinTech and the trade and           for intermediaries, the establishment of a policyholders’
  investment flows from the One Belt, One Road initiative          protection fund and the introduction of a risk-based capital
  in the region.                                                   system are expected. These changes will not only increase
                                                                   the operating costs of insurers, but also the need for
“The cost of regulation for insurers is                            more sophisticated modelling, actuarial and management
                                                                   capabilities. This increased cost burden might drive
expected to increase as Hong Kong                                  some smaller domestic companies out of the market and
                                                                   may also challenge the viability of some multinational
moves from a self-regulatory to a                                  branch operations.

statutory mode of regulation”

                                                                   17Asia Insurance Market Report 2016
   12   13   14   15   16   17   18   19   20   21   22