Hong Kong Insurance Industry

Hong Kong people have understood more about the operations of the insurance industry. The basic function of insurance is to protect the policyholders and reduce his loss in the event of adversity through diversification of risks.

Presently the insurance industry is considered to be an important pillar of Hong Kong’s economy. The insurance industry is one of the Hong Kong’s major employment sector providing jobs more than to 60,000 people.

The Insurance Industry in Hong Kong provides the following List of insurance products keeping in view Insurance coverage is vital for both business as well as every day life.

General insurance business has maintained continued growth over the period, including an approximately 1% increase notwithstanding the very difficult economic conditions in 2003, and underwriting profits have seen some improvements as a result of better risk management. Total gross premiums increased to $17,872 million from $16,532 million in 1999. They represented 1.4 percent of the Hong Kong GDP in 2000.

Office All Risk Insurance will cover every insurance your office needs from Property Insurance, Money Insurance, and Public Liability to Employees’ Compensation Insurance.

Marine Insurance considers whether you are an Exporter or an Importer. Marine insurance can protect you from any loss or damage that incur during the shipment

Inland Transit Insurance will cover any Materials, Semi-Products & Products that is under your interest while you are transporting them by any means in Hong Kong and China.

Property All Risk Insurance provides more financial security to your business. This insurance covers any external or physical loss to your property and belongings (excluding money and valuable items).

Fire Insurance/Burglary Theft Insurance covers your loss on Property due to Fire, Theft and Burglary.

Motor Insurance is a comprehensive Insurance that will also cover the damages incurred to your car.

Employees’ Compensations Insurance is a compulsory requirement for the employer to arrange this insurance for their employees while working for them.

According to a survey conducted by the Insurance Authority in 2000 on 158 general business insurers, the performance of employees’ compensation (EC) significantly deteriorated over the period from 1996 to 1999.To address the adverse situation, the Insurance Authority has endeavored to improve the transparency of EC business and adequacy of its reserves.Latest legislation that the IA has passed is that every ECI insurer was a requirement of actuarial review for business written in the relevant financial year that separately falls within any one of the following parameters.

• The gross premium income at or exceeding HK$20 million or
• The gross reserves for claims outstanding at or exceeding HK$20million; or
• The gross reserves for claims outstanding being below HK$20 million but exceeding the amount of solvency surplus as calculated under the Ordinance

Employees’ compensation is one of the statutorily required insurance products. Pursuant to the Hong Kong Employees’ Compensation Ordinance (Cap. 282), every single named company needs to buy insurance with a limit of indemnity of HK$100 million and HK$200 million to protect their employees. Policyholders are required to pay an ECI levy of 5.3 percent on the policy premium.

Money Insurance (Business Only) will cover the loss of Money due to Burglary, Theft or Fire.

Group Medical Insurance is designed for organizations with at least 5 persons, which can cover your cost for both In-Patient and Our Patient. Medical cost can be very expensive nowadays.

Public Liability Insurance will cover for the Insured legal liability to Third Parties for accidents arising during the course of and in connection with the Insured Business in the Insured Premises.

Life insurance in Hong Kong has recorded double-digit growth each year for the past 10 years. With the recovery of the economies of Hong Kong and the region, the Hong Kong’s Life insurance industry is continuously growing.

Home Insurance will give you a package of insurance protection mainly for Home Contents, Family Personal Accident, Loss of Money & Unauthorized Use of Credit Card, and Personal Liability.

Travel Insurance will cover Medical Expense, Loss of Baggage and Personal Effects, Travel Delay expense, Delayed Baggage Expense, Loss of Money, Trip Cancellation and Personal Accident Insurance.

Personal Accident Insurance will give you a peace of mind. It will cover your medial expenses directly arise out of the accident, it also give you Death and Permanent Disability Benefit.

Domestic Helper Insurance
According Hong Kong Employees’ Compensation Ordinance, an employer is responsible to buy an Employees’ Compensation Insurance to cover medical expense and compensation to their domestic helper if they suffer from an accident while working for the employer. This insurance will also include a Personal Accident Insurance and Hospitalization Insurance.

How To Conduct Insurance Business In Hong Kong?
No person may conduct insurance business in or from Hong Kong unless they are an authorized insurer, Lloyd’s member, or an association of underwriters approved by the Insurance Authority. The minimum requirements for authorization include the paid-up capital, solvency margin, fitness and properness of directors and controllers, and adequacy of reinsurance arrangements. These requirements relate to the need for a viable business plan and a physical presence in Hong Kong.

   Business Type Minimum Paid Up capital          (HK $) Non-statutory General Business $ 10 million Statutory General    Business 20 million Long Term Business 10 million General & Long term Business 20 million Captive Insurers 2 million

Solvency Requirements

The objective of solvency margin requirement is to provide a reasonable safeguard against the risk that the insurers’ assets may be inadequate to meet its liabilities arising from unpredictable events. In respect of general insurance business, insurers shall maintain a solvency margin determined on the “premium income basis” or “claims outstanding basis,” whichever is the greater, and subject to a minimum of HK$10 million for non-statutory business insurers and HK$20 million for statutory business insurers.

Authorization

The Insurance Authority (IIA) in Hong Kong strongly recommends that applicants talk to them before submitting the application form, so that they can explain more fully the relevant requirements to the applicant and hence facilitate the processing of the application. An insurer incorporated overseas could obtain authorization to carry on business in Hong Kong in the form of a branch office.

Regulatory Environment

The regulatory measures developed in Hong Kong are supported by a system of self-regulation by the insurance industry. The mutual cooperation and support is characteristic of the way that the industry behaves in Hong Kong. Self-regulatory measures in the insurance market are formulated by the insurance industry in consultation with the Government.

Conclusion

The statistics from the 2001 Report of the Office of Insurance Commissioner reflect that the Hong Kong insurance market is gradually regaining its ground from 1999. The pace of recovery was accelerated by the September 11, 2001, attacks in America to some extent due to the shrinkage of reinsurance capacity. As a result, the strong demand of good financial capacity has caused a sharp increase in the premium rates. During the last decade, the basic structure of the Hong Kong industry has gradually transformed from a manufacturing-based environment into a serviced-based environment. Because of this change, the majority of the insurance business in Hong Kong has switched from industrial to commercial. After China’s accession to the World Trade Organization (WTO) in 2002, Hong Kong is expected to increase its position very fast.