Hong Kong’s insurance sector experienced a surge in sales last year, with mainland Chinese tourists contributing significantly to the robust figures. According to the Insurance Authority (IA), mainland visitors spent HK$59 billion (US$7.6 billion) on insurance policies in Hong Kong in the past year.
Factors driving this surge included the reopening of the mainland border, a weakening yuan, and the interest rate differential between China and the United States, as stated by the IA. However, the IA anticipates a return to pre-pandemic levels of sales, ranging from HK$43 billion to HK$51 billion annually, as the pent-up demand diminishes.
Clement Cheung Wan-ching, CEO of the IA, attributed last year’s strong sales to pent-up demand resulting from the Covid-19 pandemic’s disruption of cross-border travel from 2020 to 2022. Cheung remarked that while demand surged last year, it is unlikely to reach the peak of HK$72.7 billion seen in 2016.
Last year’s sales figures marked a significant increase compared to the three-year Covid-19 period, during which sales were notably lower. Sales in 2022 amounted to HK$2.1 billion, HK$700 million in 2021, and HK$6.8 billion in 2020. Moreover, last year’s figures surpassed those of the pre-pandemic era, with sales reaching HK$43.4 billion in 2019, HK$47.6 billion in 2018, and HK$50.8 billion in 2017, Cheung noted.
In 2016, a surge in insurance policy purchases prompted China to implement measures tightening cross-border payments for overseas insurance policies. Despite these measures, Cheung remains optimistic about the continued demand for insurance policies in Hong Kong, particularly given the prevailing interest rates and foreign exchange conditions.
Cheung emphasized that Hong Kong’s role as a wealth management center for mainland visitors remains significant, provided that US interest rate cuts do not occur abruptly and currency stability is maintained. The current US Federal Reserve’s key target range stands at 5.25 to 5.5 percent, having risen from zero in March 2022. Meanwhile, Hong Kong has raised its base rate from 0.5 percent in March 2022 to 5.75 percent as of July last year.
In contrast, mainland China’s one-year loan prime rate currently stands at a record low of 3.45 percent, compared to 4.35 percent in 2022. Due to the linkage between insurance policy payouts and interest rates, mainland customers purchasing US dollar or Hong Kong dollar policies can enjoy approximately two percentage points higher returns than those on the mainland.
