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In this February 2024 edition of Regulatory Insurance Update, the Hong Kong Corporate and Commercial Team provide the latest updates relating to the law and regulations, developments, and news in the insurance industry in Hong Kong.
Updates on insurance law and regulation
11 January 2024
The Insurance Authority has launched a public consultation on the following four draft rules to align with the implementation of the new capital regime:
- Insurance (Exemption to Appointment of Actuary) Rules (Cap. 41Q), which provide for the exemption of appointment of actuaries in respect of general business for marine insurers, captive insurers and certain small-sized insurers;
- Insurance (Maintenance of Assets in Hong Kong) Rules (Cap. 41T), which provide for exempting certain insurers from the requirement of maintenance of assets for all authorised insurers carrying on general business in or from Hong Kong under section 25A of the Insurance Ordinance;
- Insurance (Marine Insurers and Captive Insurers) Rules (Cap. 41U), which seek to provide a simplified capital regime for marine mutual insurers and captive insurers; and
- Insurance (Lloyd’s) Rules (Cap. 41V), which aim to provide a simplified capital regime and permit the use of letter of credit as a resource for meeting the capital requirements.
These rules cover the proposed exemption criteria for the appointment of the actuary in respect of general business, the requirements for maintenance of assets in Hong Kong in respect of general business and the valuation basis and capital requirements for marine insurers, captive insurers and Lloyd’s.
The consultation period ended on 9 February 2024. The four draft rules will be refined and finalised before being published in the Gazette and submitted to the Legislative Council.
Link to Insurance Business Magazine article
31 January 2024
The Hong Kong Securities and Futures Commission has set a minimum insurance requirement for licensed cryptocurrency exchanges mandating that these exchanges must insure at least 50% of their customers’ assets. This requirement is aimed at safeguarding investors’ funds in the event of insolvency or security breaches.
Two prominent licensed virtual asset trading platforms in the city have responded proactively to the requirement.
OSL Exchange has entered into a two-year partnership with Canopius, a syndicate of underwriter Lloyds of London, for an insurance policy covering 95% of its users’ assets.
HashKey Exchange, signed a cryptocurrency insurance agreement with OneInfinity under which coverage for up to HK$50 million to HK$400 million worth of users’ assets will be provided. The agreement also has the potential to expand coverage into incidents related to server downtime, data back-up, and load management in the future.
This move reflects the city’s commitment to establishing a robust and reliable cryptocurrency trading environment.
Insurance industry news and developments
16 January 2024
Natural catastrophes such as storm, flood, and extreme weather have become the top business risk in Hong Kong for 2024, according to Allianz Commercial, the Allianz Group’s corporate insurer.
Total claims for car insurance, property insurance, and business interruptions are expected to exceed US$395 million. Patrick Zeng, CEO of Allianz Commercial Hong Kong and Greater China, considers it unsurprising that natural catastrophes have become the top risk in Hong Kong owing to the severe floods experienced last year caused by the city’s heaviest rains since 1884.
Zeng added, “Cyber incidents and Market developments are also major concerns as companies grapple with increased cyberattacks and challenging market conditions. Enhancing business resilience through rigorous risk management and transfer will therefore be vital to ensure companies are protected against major unexpected losses and damages.”
Link to Alliance Commercial’s media release
23 January 2024
As of 2024, Hong Kong’s life insurance industry is said to be worth HK$459.9b (US$58.7b) in terms of direct written premiums. According to a report by data and analytics company GlobalData, this is expected to rise to HK$539.1b (US$68.8b) in 2024, which represents an annual growth rate of 4.1% in the following four years.
This year’s growth stems from Hong Kong’s economic recovery together with the influx of more mainland Chinese tourists following the relaxation of travel restrictions.
The demand for whole-life insurance policies is also expected to increase as insurers redesign these plans by enhancing protection and inclusivity elements such as offering whole-life protection for senior citizens and launching ESG-related investment-focused insurance plans. This aligns with the projected rise in the Hong Kong population over 65 years old from 15.3% in 2015 to 22.0% in 2025.
According to Manogna Vangari, Insurance Analyst at GlobalData, the Hong Kong economy started to recover in 2023 and is expected to continue in 2024, supporting life insurance growth. The integration between Mainland China and Hong Kong will bring more momentum to that growth.
Insurance and reinsurance
Hong Kong