Insurance sales to Visitors from China have seen a Sharp Rise in Hong Kong

The Insurance Authority (IA) has released provisional statistics for the first quarter of 2023, shedding light on the performance of the Hong Kong insurance industry. The data reveals a 7% decrease in total gross premiums, amounting to $147.2 billion compared to the same period in 2022.

Long-Term Business Insights

In the first quarter of 2023, the total revenue premiums for in-force long-term business reached $126.6 billion, indicating an 8.9% decrease. This figure mainly comprised $109.7 billion from Individual Life and Annuity (Non-Linked) business, reflecting a decline of 3.2%. Additionally, $6.5 billion was generated from Individual Life and Annuity (Linked) business, showing an 18% decrease. Moreover, $8.3 billion came from Retirement Scheme business, which experienced a significant drop of 47.6%. This decline was primarily due to isolated transactions related to Retirement Scheme business in the same period of 2022, as well as the premium payment pattern of certain products in the Individual Life and Annuity (Non-Linked) business. On a positive note, total claims and benefits paid to policyholders increased by 9.6%, amounting to $78.5 billion.

During the same period, new office premiums for long-term business, excluding Retirement Scheme business, experienced a growth of 10.7%, reaching $47 billion. This figure consisted of $43.5 billion from Individual Life and Annuity (Non-Linked) business, which witnessed a significant increase of 15.2%. However, Linked business recorded a decrease of 25.2%, with premiums amounting to $3.4 billion. Notably, around 16,600 Qualifying Deferred Annuity Policies were issued, attracting $1 billion in premiums, representing 2.2% of the total for individual businesses.

The recovery of business with Mainland Chinese visitors played a significant role in driving the surge in new business premiums. Following the resumption of cross-boundary passenger movement and a relatively low comparison base from the previous year, new business premiums from Mainland visitors reached an impressive level of $9.6 billion in the first quarter of 2023. This represents an astonishing increase of 2686.4% and accounted for 20.5% of the total for individual businesses. To provide context, it is worth noting that the corresponding figures in the first quarter of 2019 were $12.8 billion and 26.4%, respectively. Furthermore, approximately 97% of the policies taken out by this group of customers were settled at regular intervals, indicating a preference for non-single premium policies. Whole life, critical illness, and medical insurance accounted for 56%, 33%, and 5% of the policies issued, respectively.

General Business Insights

The provisional statistics on the Hong Kong insurance industry for the first quarter of 2023, highlighting a significant increase in general insurance business. Gross premiums reached $20.7 billion, marking a notable 6.9% growth, while net premiums amounted to $12.5 billion, representing a 4.1% increase. The industry also experienced a decrease in total gross claims paid, which amounted to $7.5 billion, reflecting a decrease of 4.7%. However, the overall underwriting profit declined from $1,063 million to $513 million.

Direct business in the general insurance sector performed well, with gross and net premiums reaching $14.9 billion and $10.1 billion, respectively. The Accident & Health business emerged as a standout, recording a substantial increase in gross premiums. Amounting to $6.1 billion, this segment experienced growth of 12.4%. The increase can be attributed to new business written, rate hardening for the medical subclass, and a rise in outbound travel for the non-medical subclass. Additionally, Motor Vehicles business and Property Damage business reported gross premiums of $1.3 billion (increased by 13.1%) and $1.6 billion (increased by 4.5%) respectively. However, the gross premiums of Pecuniary Loss (including Mortgage Guarantee) business suffered a decline of 9.3%, falling to $860 million due to a sluggish property market. The gross premiums of Ships business also shrank to $1.5 billion (decreased by 10.3%) as a result of actions taken by a marine insurer to reclassify direct business to reinsurance inward business.

Despite the growth in direct business, the overall underwriting profit generated from this segment decreased significantly. With an overall underwriting profit of $387 million, there was a decline of 59.9%. The net claims incurred ratio rose from 54.5% to 60.5% due to the normalization of economic activities, which led to adverse outcomes in the Accident & Health, Motor Vehicle, Ships, and General Liability (including Employees' Compensation) business categories.

On the other hand, reinsurance inward business fared better, driven by the reclassification of direct Ships business and new coverages written for Property Damage business. Gross premiums in this segment reached $5.7 billion, experiencing an impressive increase of 12.7%. The net premiums amounted to $2.4 billion, showing a growth of 3%. The overall underwriting profit improved from $98 million to $127 million, with the net claims incurred ratio dropping from 61.6% to 52.9%. Positive outcomes in the Property Damage and Goods In Transit business categories contributed to this improvement, partially offsetting the deteriorated performance of the Pecuniary Loss business.

The growth in general insurance business is particularly noteworthy due to the increased involvement of Chinese customers. The surge in outbound travel and the preference for policies such as Accident & Health, Motor Vehicles, and Property Damage among Chinese visitors played a crucial role in driving the overall growth of the industry in the first quarter of 2023.

The Insurance Authority press release can be found HERE.