Hong Kong’s government has recognised that it is lagging behind other global financial hubs, including Singapore,
Aon’s Asia Market Review 2018 has revealed.
In the past year, Hong Kong had a change of government and selected a new chief executive, as well as the inauguration of its new insurance regulator, the Hong Kong Insurance Authority. Such changes have brought about a slew of investment, both in infrastructure and technology.
According to Aon, in order to boost Hong Kong’s stature as a regional and global financial hub, the government is encouraging investment in the financial technology (fintech) and insurance technology (insurtech) sectors. Various stimulus have been offered, such as incentives, tax breaks, regulatory sandboxes, and other forms of government assistance.
However, 2017 also saw five category eight or above typhoons, and the first “T10” since 2012. That means that 2017 was the worst typhoon year for Hong Kong since 1999. Typhoon Hato is the most notable, heavily damaging both Hong Kong and Macau. A large portion of Hato losses will be settled in the Hong Kong insurance market, and, coupled with record-breaking catastrophe losses in North America, Aon predicted that “major international insurers in Hong Kong will be increasingly selective and adopt a more cautious underwriting approach as we head into 2018.”
Fortunately, Chinese and Hong Kong insurers will be able to temper any hardening rate environment, the report said.
In 2017, general insurance rates dropped between 0% and 10%, and the trend is set to continue in 2018, with rates becoming 5% to 10% lower. The reverse is true for health and benefits insurance, as rates increased by 0% to 5% in 2017, and are expected to rise by up to 10% in 2018.
With regard to the insurance lines where Hong Kong business is likely to pick up, Aon identified directors and officers (D&O), professional indemnity (PI) and cyber insurance.
“In 2018, we expect to see some areas where clients will purchase higher liability limits, particularly for [D&O] and [PI] policies, as awareness grows of the increasing cost of litigation, and therefore the need to procure greater limits,” the report said. “We have seen an increase in enquiries in cyber insurance this year following WannaCry, Petya, and the recent WWPKG attack. We expect more companies will purchase cyber insurance in 2018 to protect their businesses.”
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