General observations
 
In his maiden Policy Address 2022, the Chief Executive of the Hong Kong SAR the Honourable John Lee suggested, among others, the following initiatives relating to the insurance industry:

• To enhance Hong Kong's competitiveness in financial services, we will…. promote mutual market access … Moreover, we will strive to establish insurance after-sales service centres in places such as Nansha and Qianhai in the near future to provide support services for residents in the GBA holding Hong Kong policies. This is also an important step towards mutual access of insurance markets in the GBA (Section 37(iii)).

• …develop green and sustainable finance – We will promote the development of Hong Kong as a premier financing platform for governments and green enterprises in the Mainland and around the world. We are also developing Hong Kong into an international carbon market…(Section 37(iv)).

• …strengthen asset and risk management – …we will implement a risk-based capital regime for the insurance industry in 2024 to align with international standards, and launch a public consultation within this year on the proposal of establishing a policy holders' protection scheme (Section 37(v)).

• National strategies including the 14th Five-Year Plan, the GBA development and the Belt and Road Initiative have injected continuous impetus to the growth of Hong Kong...The Government will make good use of the strengthened Guangdong-Hong Kong and Hong Kong-Shenzhen co-operation mechanisms and utilise the relevant task forces as platforms to deepen collaboration with other GBA cities. We will also actively participate in the development of major platforms for Guangdong-Hong Kong-Macao co-operation, including Qianhai of Shenzhen, Nansha of Guangzhou, Hengqin of Zhuhai and the Shenzhen-Hong Kong Lok Ma Chau Loop…(Section 35).

• …. To enhance our competitiveness, the Government will put in place new institutional setups and implement an array of new initiatives targeted at attracting enterprises, investment and talents. We will…establish the Talents Service Unit, led by the Chief Secretary for Administration, for formulating strategies to recruit talents from the Mainland and overseas and co-ordinating relevant work, as well as providing one-stop support for incoming talents (Section 26(ii)).

The HKFI is supportive of the above policy agenda, which will, in the long run, enhance Hong Kong’s status as the international financial and risk management hub. One of the key initiatives, in particular the national strategies on the GBA development and the Belt and Road Initiatives and attracting talents, are very much in line with the core areas identified by the Think Tank set up by the HKFI to reinvigorate its offshore insurance capabilities.  In this connection, the Think Tank will conduct deep-dive analysis and make viable recommendations to the Administration on these two fronts. 

On Hong Kong as an international insurance centre, we would like to share the following observations.
 
Hong Kong as an international insurance hub
 
While we applaud the Administration for its recent relaxation of pandemic restrictions, we must also recognize that a number of preventative measures continue to be imposed on travelers and residents that do not exist in other International Financial Centres. Until these are fully and firmly removed, it would be unrealistic to expect customers or practitioners to return to do business in Hong Kong in any material way.
 
The mortality rate in Hong Kong has stabilized since the Omicron outbreak in March of this year. Based on analysis by the HKFI, Hong Kong’s death rate since July has been in line with the historical averages over the past 6 years. This infers that the Administration’s actions over the past several months have been effective, and also that COVID-19 no longer represents an abnormal risk to population health. In this light, the HKFI calls on the Administration to consider removing all remaining pandemic restrictions so that Hong Kong can thrive once more as an International Financial Centre and catch up the ground it has ceded to other offshore jurisdictions over the past two years.
 
To this extent, the Think Tank set up by the HKFI has conducted a member survey in August 2022 to ascertain industry views on Hong Kong as an international insurance and risk management hub.  Member insurers underwriting 86% of the gross premiums responded and collectively shared bearish concerns over how constraints on freedom of movement had impacted Hong Kong’s competitiveness as a risk management hub:

• 93% of respondents stated that the closure of borders, quarantine and testing requirements had negatively impacted the movement of business executives and decision makers.

• 98% of insurers indicated that increased freedom of movement of people and open borders would positively impact the development of the insurance industry of Hong Kong.

• 91% of insurers said their ability to retain and attract talent was worse than pre-pandemic levels.

• 85% of respondents agreed with the immediate removal of all travel restrictions as the most important measure to enhance Hong Kong’s status as an insurance hub.

The HKFI survey also highlighted that many HK-based insurers were concerned about Hong Kong’s competitiveness as an International Insurance Centre. Taking Singapore as an example, the authorities have introduced a number of policy changes in recent years that deliver financial incentives for international corporations to move business to Singapore, and for international talent to move their careers to Singapore, such as the Insurance Business Development (“IBD”) Scheme, concessionary tax rates for moving global and regional headquarters to Singapore, and the new Overseas Networks & Expertise (“ONE”) Pass.
 
There are both pull and push factors at stake – on one hand the Singaporean government and financial regulator is deploying large incentives to attract business and business people to Singapore. On the other hand, pandemic-related frictional costs of doing business in Hong Kong remain high. If we want to capture our fair share of the offshore market in Asia, for both life and general insurance, then we need to solve for both of these factors so that human capital and financial capital is attracted to Hong Kong.
 
In this connection, we are pleased to note that the Policy Address has put in some measures to address this issue.  The industry stands ready to contribute in order to bolster the status of Hong Kong as an International Insurance Centre.

Note: The Hong Kong Federation of Insurers, an industry body representing 138 insurers in the territory, has set up a Think Tank to reinvigorate Hong Kong’s insurance market and status as international insurance hub. Following announcing the above findings and recommendations relating to freedom of movement, the Think Tank will produce more strategic ideas on the other core areas for the consideration of the Government and stakeholders.