Hong Kong’s Insurance Authority has completed many months of negotiations to achieve a milestone deal with the Mainland’s China Banking and Insurance Regulatory Commission that will provide valuable, preferential treatment to Hong Kong reinsurers.
Under the Equivalence Assessment Framework Agreement on the Solvency Regulatory Regime between the Mainland and Hong Kong, a lower capital charge will be applied to Mainland insurers if they cede business to qualified reinsurers in Hong Kong.
Hong Kong is currently grouped offshore with all other non-Chinese jurisdictions as a result of the introduction of the China Risk Oriented Solvency System (C-Ross) introduced on the Mainland in 2016.
The IA said the new measure would encourage Mainland insurers to give priority to Hong Kong reinsurers when they consider ceding business offshore. Further details of the new arrangements are expected from the CBIRC soon.
In March 2017, Hong Kong’s Financial Services Development Council had urged the Hong Kong Government to seek an agreement with what was then the Chinese Insurance Regulatory Commission to apply Special Administrative Region status to Hong Kong under C-Ross. In truth the IA had already begun discussions with its Mainland counterpart. But an agreement was delayed at least partly as a result of the departure of the head of the CIRC Xiang Junbo as he came under investigation for corruption. Further delays occurred after the banking and insurance regulators merged in March 2018.
The IA made its announcement during a breakout forum at the Belt and Road Summit held in Hong Kong last week.
Summarizing the potential contribution Hong Kong insurers could make to the Belt and Road Initiative, executive director of General Business of the IA, Simon Lam said:
“The Hong Kong insurance industry is well positioned to provide professional risk management services and effective insurance coverage for BRI projects.”
He added: “The IA is committed to strengthening Hong Kong’s role as the ideal risk management centre for BRI projects and to encouraging insurance and reinsurance placement in Hong Kong by related stakeholders.”
In the forum, Mr Lam also mentioned that the IA was planning to launch an insurance facilitation platform to connect enterprises engaging in BRI projects and commercial activities to a talent pool of insurance services providers and other related professional services providers. In preparation for setting up such a platform, the IA will meet potential partners and other stakeholders in the coming months to listen to their views and better understand their needs.