Hong Kong Insurance Posts Healthy 2011 Results
By Marius | Published March 20, 2012
Provisional market performance statistics released this past week by Hong Kong’s insurance regulatory body, The Office of the Commissioner of Insurance (OCI), show that despite recent market turmoil and ongoing global economic uncertainty, insurance sales maintained a steady growth rate in Hong Kong during 2011, in line with other Asia Pacific markets, as more residents purchased policies for investment and protection purposes throughout the year.
According to the latest figures now available on the OCI website, the Hong Kong insurance industry registered HK$225.8 billion (US$29.1 billion) in gross written premiums last year, which equated to a considerable 9 percent increase over 2010’s provisional results. In the city-state’s general insurance sector, gross and net premiums rose by 10.7 percent to HK$34.7 billion (US$4.4 billion) and 8.5 percent to HK$23.8 billion (US$3.07 billion) compared with 2010 respectively. The regulator noted that while the overall number of insurance claims continued to rise in 2011, most insurance lines have been able to maintain profitability due to prudent underwriting discipline. Indeed, over the past year Hong Kong insurers managed to record a 14.6 percent increase in overall underwriting profit, from HK$2.6 billion (US$330 million) in 2010 to HK$3billion (US$390 million) by year-end 2011, which was a considerable achievement in a catastrophe prone and claims-heavy year.
On direct business meanwhile, the OCI dataset noted that gross and net premiums in 2011 grew by 6.4 percent and 6.3 percent to HK$25.6 billion (US$3.3 billion) and HK$18.8 billion (US$2.42 billion) respectively. This development could largely be attributed to the robust performance of Hong Kong’s property damage insurance business, which registered a considerable 16.6 percent rise in gross premiums from HK$6.8 billion (US$880 million) to HK$7.9 billion (US$1.02 billion) last year. Sales of accident and health insurance, the largest segment of Hong Kong’s non-life market, were also big contributors to the industry’s continued bottom-line progress, with year-end 2011 gross and net premiums of HK$9.4 billion (US$1.21 billion) and HK$7.8 billion (US$1 billion) respectively. The OCI expects accident and health insurance sales to continue along their double-digit growth trajectory going forward, due principally to rising healthcare costs, the expansion of private medical business, and growing public awareness about upcoming changes to the state’s healthcare system.
Hong Kong’s general liability and motor vehicle insurance business were also important contributors to the industry’s sustained premium growth figures over the past year. In the report, Hong Kong’s general liability lines, which comprises the city’s employee compensation business, recorded double digit increases in both gross and net premiums to HK$7.8 billion (US$1 billion) and HK$5.6 billion (US$720 million) for the year in that order. The motor vehicle insurance industry meanwhile grew by 11.5 percent on aggregate and recorded HK$3.2 billion (US$410 million) in gross and HK$2.6 billion (US$330 million) in net premiums during 2011. The regulator attributed the auto insurance market’s continued growth to premium hikes on commercial vehicles levied on Hong Kong motorists over the past year. The only general insurance line that registered a significant loss in 2011 was pecuniary loss liability insurance, which experienced a drop in gross and net premiums of 21.4 percent and 37.7 percent to HK$1.3 billion (US$170 million) and HK$677 million (US$87.2 million) respectively as a result of the slowdown in local property transactions.
Hong Kong’s direct general insurance business managed to sustain an underwriting profit of HK$1.9 billion (US$240 million) in 2011, which despite being a more claims-intensive year, ending up being similar to that of 2010. The OCI noted that while the underwriting profit for motor insurers shrank considerably from HK$157 million (US$20.23 million) to HK$42 million (US$5.4 million) during the year, this negative impact was largely mitigated by performance of the pecuniary loss sector, including mortgage guarantee business, where underwriting profits rose sharply from HK$543 million (US$69.9 million) in 2010 to HK$744 million (US$95.85 million) by year-end 2011 due to the release of claims reserve.
Premium growth in the property damage, general liability and pecuniary loss businesses have also helped Hong Kong’s reinsurance industry, with gross premiums rising by 24.7 percent to HK$9.1 billion (US$1.17 billion) during 2011. According to the OCI, this growth further has also driven the reinsurance sector’s underwriting profit up from HK$702 million (US$90.4 million) to HK$1.1 billion (US$140 million). Overall property damage insurance and reinsurance companies in Hong Kong were able to benefit from a relatively uneventful year in comparison to their Asia Pacific neighbours in Japan, Thailand and the Philippines.
While 2011 was a productive year for general insurance business in Hong Kong, the country’s long-term insurance market proved more than able to hold its own as well, with sales of life insurance policies remaining the sector’s principal growth driver. The OCI report noted that total revenue premium associated with in-force long term insurance business increased by 8.7 percent in 2011 to HK$191.1 billion (US$24.6 billion). Broken down more succinctly, Hong Kong’s traditional life insurance and annuity business, products with annual premiums pooled collectively to invest and pay dividends, saw their revenues increase by 27 percent annually to HK$49.4 billion (US$6.36 million) in 2011. Investment-linked life insurance products, policies that invest client premiums into various funds at varying levels of risk and return, meanwhile saw their business grow by 3.9 percent over the same period last year, totalling HK$20.8 billion (US$20.68 billion) in terms of new office premiums.
In addition to the continued growth and development of their home market, Hong Kong insurers should continue to benefit from insurance opportunities across the Asia Pacific region, and in particular Mainland China. According to the Hong Kong Federation of Insurers (HKFI), clients from Mainland China are forecast to contribute 20 to 30 percent of all new insurance sales over the next few years. Mainland activity has already been particularly apparent in new office premiums. According to the OCI report, new policies issued to Mainland visitors amounted to HK$6.3 billion (US$810 million) in premiums in 2011, equivalent to 9 percent of all individual business. These stats demonstrate that not only does Hong Kong present an inbound market opportunity for overseas firms; the city-state will also serve as Asia’s premier insurance hub far into the future.
The Hong Kong Office of the Commissioner of Insurance is a government body that works to represent the interests of policy holders and to ensure the continued stability of the insurance industry in Hong Kong.