Hong Kong’s life insurance sector is set to rebound following a recent decline attributed to the challenges posed by the COVID-19 pandemic and subsequent economic downturn, according to a recent report. The study projects a compound annual growth rate (CAGR) of 4.1% from 2024 to 2028, with direct written premiums (DWP) expected to rise from HKD459.9 billion (US$58.7 billion) in 2024 to HKD539.1 billion (US$68.8 billion) in 2028.
GlobalData’s figures indicate that the Hong Kong life insurance market is poised for recovery starting in 2024, largely driven by the easing of pandemic-related restrictions and a gradual resurgence in economic activity.
The Hong Kong economy faced substantial challenges since 2021, including prolonged pandemic restrictions, rising interest rates, and a global economic slowdown affecting consumer spending. However, the initiation of the economy’s recovery in 2023 is anticipated to bolster the life insurance sector in 2024.
The integration of Hong Kong with Mainland China, particularly within the Guangdong–Hong Kong–Macao Greater Bay Area (GBA), is expected to contribute to the growth of Hong Kong’s life insurance business. The reopening of Hong Kong’s borders to international visitors in December 2022, after three years of travel restrictions, has already demonstrated positive effects.
The Insurance Authority (IA) reported a significant increase in business from Chinese customers in 2023, a trend expected to persist into 2024.
Mainland Chinese residents constitute a crucial customer base for Hong Kong’s life insurers, attracted by higher returns on life insurance products in Hong Kong compared to those in China. The IA noted a 21.3% increase in new business from mainland Chinese customers in the first half of 2023, rising to HKD31.9 billion (US$4.1 billion) from HKD26.3 billion (US$3.4 billion) in 2019.
Dominance of Whole Life Insurance
Whole life insurance remains the dominant product in the market, projected to represent 69.8% of life insurance DWP in 2023. This demand is fueled by demographic shifts such as an aging population, increased life expectancy, and lower fertility rates. GlobalData’s Macroeconomic Database predicts that the population aged over 65 years in Hong Kong will rise from 15.3% in 2015 to 22.0% in 2025.
The demand for whole-life insurance policies is also on the rise as insurers enhance these plans with added protection and inclusivity features, including coverage for senior citizens, additional death and dementia-related benefits, and environmentally and socially responsible investment-focused options. Whole life insurance is forecast to grow at a CAGR of 4.2% during 2024-28.
Endowment Insurance and General Annuity Trends
Endowment insurance, the second-largest life insurance product, is expected to account for 9.1% of the DWP in 2023. With high-interest rates prevailing, insurers are focusing on expanding their mix of linked insurance products, including protection-linked plans and investment-linked assurance schemes. Endowment insurance is projected to grow at a CAGR of 3.6% from 2024 to 2028.
General annuity, ranking third, is estimated to represent 7.3% of the life insurance DWP in 2023. Its growth, forecast at a CAGR of 3.1% over the same period, is propelled by an aging population and a shrinking working-age demographic. Hong Kong’s working-age population is expected to decrease from 73.4% in 2015 to 67.8% in 2025, according to GlobalData’s Macroeconomic Database.
Term life, pension, and other life insurance products collectively are estimated to hold a 13.8% share of life insurance DWP in 2023.
In other related developments, Hong Kong residents no longer hold the world’s longest life expectancies, with the city relinquishing its crown to Japan as COVID and overall stress weigh on local lifespans.
