“I lens” – June 2003 Issue
Commissioner Speaks
A series of corporate collapses, terrorist attacks, and the recent SARS outbreak have sent us strong messages that we are facing a more uncertain world. The trend of globalization is irreversible. International cooperation in corporate governance, information exchange and harmonized regulatory standards are not just essential, but indispensable to ensure systemic stability of the financial markets.
From an economic perspective, life insurers are able to harness our savings, facilitate efficient use of capital funds, and therefore act as significant institutional investors. As a fast growing financial services sector in Hong Kong, life insurance industry is contributing to more than 4% of our GDP and we have over 5 million in-force individual life policies. Undoubtedly life insurance plays an important role in Hong Kong’s economy.
We have recently introduced a statutory definition of “Hong Kong long term insurance business” and prescribed a set of statutory annual return forms to enhance supervision of the life insurance industry. We have also put in train as part of our regulatory agenda feasibility studies on establishing policyholders’ protection funds and strengthening supervision of life insurers’ asset management. We shall continue to work closely with the industry to enhance the protection of policyholders.
insurance industry and in particular our efforts in keeping our life insurance supervisory regime in line with international standards.
Benjamin Tang
Commissioner of Insurance
Institutional Set-up of the OCI under Review
The Government is consulting the insurance industry and other relevant stakeholders on the institutional set-up of the OCI. A related information document is available at the OCI’s homepage. Any comments on the proposal are welcome. Please send the comments to us by 10 July 2003.
Editor’s Note
Life insurance is an essential ingredient of our modern living. It does not only protect a policyholder's dependents, but also serves as an effective financial planning tool to meet his future commitments, for instance buying a new apartment, getting married or financing his children's education. Depending on a policyholder's needs, it may supplement his retirement income too. The life insurance industry offers a wide variety of products which range from basic protection plans to primarily investment vehicles. Mr. Anthony Lau, the immediate past Chairman of the Life Insurance Council of The Hong Kong Federation of Insurers, is critically examining how a universal life product differs from the traditional policies and its distinctive flexible features in assisting a policyholder to manage his personal wealth.
Feature
Mr. Anthony Lau is the President of Sun Life Financial (HK) Ltd and was the
Chairman of the Life Insurance Council of The Hong Kong Federation of Insurers for 2002/03. Mr. Lau joined the life insurance industry in 1974. He has been an insurance broker, agent, agency manager and insurance company executive for a period of about 30 years.
Universal Life Insurance - A Tool For Wealth Management
Mr. Anthony Lau
Background, How It Came About?
Investment-Linked Insurance is sometimes thought of as the “newest” and “most advance” product of the new millennium. But, as a matter of fact, insurance products such as Equity-linked endowments were in existence in Europe as early as the 1960's. Certain “interest sensitive” whole life insurance was also marketed in North America in the early eighties. One may notice that these “equity-linked” products always find favour when the investment climate is good and will usually disappear in a stock market down turn.
Some people may still remember that worldwide bank interest went up to a very high level (over 20% per annum in the United States) in the eighties. At that time, there was a real danger of “disintermediation” i.e. funds were actively transferred from insurance policies to “high interest” deposits by way of policy loans and/or
surrenders. Due to the long term nature of life insurance fund investments, life insurers could not have adjusted their returns upwards quickly enough to respond to these money market fluctuations.
In the United States, a type of life insurance that divests or “unbundles” investment from life protection was developed and due to its very flexible nature, was named “Universal Life (UL)”. This is basically a combination of a term insurance with an investment/savings fund, with premiums being withdrawn from the fund, usually monthly, to pay for the life insurance protection. When the investments are linked to equities, they are named Variable Universal Life (VUL). Investment-linked insurance is a term used commonly in Britain and Hong Kong, while VUL is generally used in North America.
A Comparison to Traditional Whole Life Insurance
The major difference between UL and Traditional Whole Life insurance lies in the degree of flexibility. Many UL policies can allow addition or deletion of coverage and amount of insurance. It may also increase or decrease the policy’s savings component. Flexibility of premium payment is also an advantage. UL policies may allow additional “dump-in” of funds, withdrawal of savings, and stopping premium for a certain period as long as the fund is enough to pay for the monthly insurance charges.
Many years ago, some of my customers asked the question whether we could consolidate all of their life policies purchased over the years. The answer was that it was not possible due to different issue ages and policy terms, etc. This problem, however, may be addressed in the future by UL policies by providing for adjustment
of sums insured, cash values, coverage, or even putting a whole family into one policy. In commercial insurance situations, life coverage on a number of business partners can also be consolidated within one policy owned by a trustee or a company.
What's in It for The Customer?
The introduction of VUL reflects the on-going development and sophistication of the life insurance industry. While the customer gains in flexibility, for example, to add or delete coverage, or to have “premium holidays” when funds are sufficient to pay the premiums, as well as achieving higher returns when the market is good, he must also have a full understanding of the risk of his investments.
The major difference between UL and VUL rests on the investment component whereby the investment return of UL is generally linked to an external interest rate index, such as the government treasury bill or the bank’s deposit rate, whilst the investment return of VUL is generally linked to the equity. Another difference is that VUL is unitized, but UL is not.
As long as the customer understands what he wants and the caveats involved, UL Insurance is a good tool for both protection and investment.
A Tool for Wealth Management
In almost all developed economies, life insurance selling has been moving from the service type of “product selling” to “financial advice”.
Many “Financial Planners” are adopting VUL as a platform for clients’ wealth management. This is because of its flexibility to readily increase the policy’s savings/investment element, which especially for Hong Kong, will have tax planning advantages. For the life insurance professionals, it will provide excellent customer value to use this platform to link up with interrelated services and financial products to their customers.
With the advancement of health science, people are living longer. Many people, however, are not prepared to work longer years and most of us wish to retire at normal ages, if not earlier. This means the traditional “protection” oriented insurance planning will inevitably be moving towards retirement planning and be catering for ageing population’s wealth accumulation needs. With the flexibility of UL insurance, this product will be a very useful tool for wealth management.
The future mortality tables are projecting a maturity age of 120 years. It means life insurers will need to develop new product strategies to reflect the lower cost of insurance and lower reserves. With the unbundling of insurance costs within the UL policy structure, we may easily offer lower mortality charges to our customers, and hence allow higher returns on their invested funds.
Looking Ahead
Many of us have predicted that with the advent of UL, traditional insurance will gradually be replaced. My belief is that it will take a long while for this to happen, if ever at all.
with savings playing a secondary role. Most people want financial security before economic potential. Life insurance products should offer financial protection, regardless of the investment component. I don’t think we shall daily check the financial pages to see how much our policies are worth in case we die today!
Because UL offers such flexibility as “premium holidays”, the accumulation of funds may not be regular enough to provide adequate premium to pay for the policy’s cost of insurance. We have seen people who bought life insurance for over 20 years but were left with no protection because their policies had lapsed. Life insurance has been around for 200 years. The major difference between life and non-life insurance is that all life policies will eventually result in claims! The discipline of premium payment over the long term is the key to ensuring the policy is in force when we need it. Buying a new policy at an old age will be difficult, if not impossible, due to the high premium costs or even the non-insurability.
To overcome this objection, some UL policies in the United States are offering a “no lapse” guarantee if the policyholder pays the stipulated minimum premium for a certain period of time. There are also UL policies with a minimum return guarantee. This is, in effect, moving back from divesting the investment risk to the policyholder to a guarantee provided by insurers.
No matter how insurers design their products, life insurance is about money for future delivery. All sorts of life insurance products are essentially making a promise to deliver the money in the future when we need it most, i.e. when we grow old or when we pass away. The first important question regarding money for future delivery is, “Will it be there?” The second question will be, “How much?” UL policies will serve us well if a policyholder understands the interplay of “give and
take”. It is a matter of balance between providing excellent customer value and what life insurance can achieve for a policyholder’s protection.
Cover Story
The Future Direction of Life Insurance Regulation in Hong Kong
Under the current regulatory regime, the Insurance Authority has adopted a prudential supervisory approach on insurers and a self-regulatory system on insurance intermediaries. Our emphasis is put on building up a regulatory mechanism with appropriate checks and balances, with the objective to protect the interests of policyholders and maintain the general stability of Hong Kong’s insurance industry.
As the insurance regulator, the Insurance Authority is committed to enhancing Hong Kong’s regulatory regime to meet the challenges of an increasing dynamic and competitive marketplace. Therefore our regulatory framework is under constant review to cope with the rapid market developments.
Information Disclosure
With the coming into effect of the Insurance Companies Ordinance (Amendment of Part 8 of Third Schedule) Regulation 2003 on 3 April 2003, all life insurers are required to submit a set of Hong Kong business returns with additional accounting and actuarial information. The first set of returns shall be submitted for the first financial year ending on or after 31 December 2003. A formal definition on “Hong Kong long term insurance business” has also been introduced under the Insurance Companies Ordinance (Amendment of Part 1 of Third Schedule) Regulation 2003 to delineate this kind of insurance business for reporting purpose, so as to ensure integrity of the information submitted to the Insurance Authority. Details of the
definition and return forms are available for downloading from the website of the Office of the Commissioner of Insurance (“OCI”), http://www.info.gov.hk/oci. The amendment regulations provide a uniform basis for insurers’ submission of financial information, which will enhance our supervision of their long term insurance business in Hong Kong.
Regulation on Assets of Long Term Business Insurers
For better protection of the interests of policyholders, a feasibility study will be carried out on the existing framework for the supervision of assets of life insurers. The review will cover two main areas for potential improvement. One will focus on the need for a standard basis of valuation to ensure that assets of long term business are valued on a prudent and uniform basis. It is believed that the adoption of a standard basis will help reduce the risks of over-valuation of assets and the undue concentration in a particular investment. As for another area for potential improvement, we are exploring a suitable mechanism to safeguard long term business assets attributable to policyholders in Hong Kong. Such a mechanism will help enhance protection for Hong Kong policyholders in the event of insolvency of a life insurer, in particular when it is incorporated overseas.
Policyholders’ Protection Funds
At present, there are two insolvency funds for general insurance business covering policyholders of motor and employees’ compensation insurance. Taking into account relevant arrangements in some advanced economies, we consider that there is a need to commission an in-depth consultancy study on establishing Policyholders’ Protection Funds (“PPF”). The study is divided into two stages. Stage one study will focus on the need and feasibility of establishing PPF; and if
found feasible, the Insurance Authority will proceed with the stage two consultancy study to develop a detailed implementation strategy. It is planned that a public consultation will be carried out in summer 2003.
Legal and Technical Corner
Guidance Note on Classification of Class C – Linked Long Term Business
Insurers carrying on Class C – Linked Long Term Business under the Insurance Companies Ordinance (“Ordinance”) are required to seek authorization for marketing this type of products from the Securities and Futures Commission (“SFC”). These insurers are also required to comply with the provisions of the Ordinance and to conduct their business in accordance with the disclosure requirements prescribed in the Code on Investment-Linked Assurance Schemes issued by the SFC.
During a recent review of Hong Kong’s regulatory regime for investment products, the Insurance Authority noted that some insurers are confused with the classification of business between Class A - Life and Annuity and Class C - Linked Long Term Business. In February 2003, the Insurance Authority issued a Guidance Note (“GN11”) to provide guidelines to the life insurance industry on the proper classification.
While the legal provision for the definition of Class A and Class C of long term business under the Ordinance shall prevail, some predominant features of Class C are identified in the GN11. They are:
(a) the policy’s benefits are in whole or in part by reference to the value of, or the income from, specified assets or group of assets or by reference to movements in share price or other index;
(b) options are given to the policyholder to choose the underlying investment assets;
(c) market value adjustment or similar adjustment is applied to the calculation of surrender/withdrawal value; and
(d) the policyholder is bound to bear partly or wholly the risk of the linked investments.
However, whole life and endowment participating policies under which policyholders are entitled to regular bonus/dividend declared by insurers shall remain as Class A business. Details of the GN11 can be downloaded from the OCI’s website.
Insurance Companies Ordinance (Amendment of Part 1 of Third Schedule) Regulation 2003 & Insurance Companies Ordinance (Amendment of Part 8 of Third Schedule) Regulation 2003
The above Amendment Regulations were gazetted on 17 January 2003 and came into operation on 3 April 2003.
Corporate Governance
The Guidance Note on the Corporate Governance of Authorized Insurers, promulgated by the Insurance Authority on 5 August 2002, shall become effective from 1 September 2003. All authorized insurers, unless exempted, are reminded to comply with the guidance note commencing from the effective date.
Long Term and General Insurance
New Cooling-off Initiative
In January 2003, the Life Insurance Council of The Hong Kong Federation of Insurers revised the Cooling-off Period. The Cooling-off Period was first introduced in July 1996 to enhance consumer protection by providing a free-look period for policyholders in taking out life insurance, which is considered a long term financial commitment. If a policyholder wishes to change his mind during the Cooling-off Period, he is entitled to cancel the policy and to request a premium refund.
Under the revised self-regulatory measure, the Cooling-off Period is extended to the later of:
(a) 21 days after the date on which the application for the new policy has been signed;
(b) 14 days after the date of issue of the new policy;
(c) 14 days after the date on which the Customer Protection Declaration form has been copied to the insurer of the policy replaced, in the case of a policy replacement; and
(d) 5 days after the delivery of the policy (or a notice informing the policyholder of the availability of the policy and the expiry date of the Cooling-off Period) to the policyholder or the policyholder’s representative.
Period extension in (c) facilitates exchange of information among relevant insurers for detection of policy-twisting activities and item (d) practically ensures sufficient time be available for policyholders to obtain their life policies and alert them of the imminent expiry of their cooling-off rights.
Revision of the Assumed Rates of Return in Illustration Standards
The Insurance Authority, the Securities and Futures Commission and the Life Insurance Council have recently agreed to revise the assumed rates of return in the Illustration Standards for Unit-Linked Policies and the Illustration Standards for Universal Life (Non-Linked) Policies.
A life insurer was previously required to use, in the standard illustration documents for Unit-Linked Products and Universal Life (Non-Linked) Products, a low rate at not more than 5% per annum and a high rate at not more than 11% per annum. Given the persistent low interest rate and the volatility in the stock market, it was decided that the assumed high rate be lowered from the previous 11% per annum to the new 9% per annum to reflect a conservative investment expectation. The new requirement takes effect from 1 February 2003.
Through illustration documents, a life insurer is required to project the future cash values of the above two types of policies under a prescribed range of assumed rates of return for the prospective policyholders’ reference. This illustration, which aims to enable prospective policyholders to make informed decisions, is provided at the point of sale. Policyholders should note that the assumed rates of return are not guaranteed and these rates are used for illustrative purpose only.
Employees Compensation Insurer Insolvency Scheme
On behalf of the Government, the Commissioner of Insurance entered, on 21 February 2003, into an agreement with the newly established Employees Compensation Insurer Insolvency Bureau (“ECIIB”) for the latter’s operation of the Employees Compensation Insurer Insolvency Scheme (“Insolvency Scheme”).
The Insolvency Scheme was established for the purpose of taking over the responsibility of the Employees Compensation Assistance Scheme (“ECAS”) in providing protection to employees in the event of insolvency of an employees’ compensation (“EC”) insurer. The ECIIB has also entered into a domestic agreement with each of the EC insurers participating in the Insolvency Scheme.
Established on 1 April 2003, the Insolvency Scheme will only take over the role of ECAS in dealing with EC insurer insolvency one year later, i.e. it will meet insurance claims arising out of insurer insolvency occurring on or after 1 April 2004. This arrangement allows some time for the Insolvency Scheme to build up funds before it assumes the financial obligation.
The Insolvency Scheme is modelled on a similar arrangement currently operated by the Motor Insurers’ Bureau of Hong Kong. The ECIIB has appointed a secretariat to handle the new scheme’s operation. A fund, named “Insolvency Fund”, is created and held on trust for the scheme’s purpose. All of the member insurers are required to contribute to the Insolvency Fund on a quarterly basis, at 2% of their EC premiums written. It is up to the individual EC insurers to decide whether or not, or to what extent, these contributions will be recouped from their policyholders.
Motor Insurance - Excess Payment vis-à-vis Insurer’s Liability
A “Claim Excess” clause is commonly found in a motor insurance policy: In
respect of any event giving rise to a claim for indemnity against liabilities for third party property damage, the insurer will not be liable for the first amount of such claim specified in the Schedule as “Third Party Property Damage Excess”. The
Insurance Authority has received complaints concerning motor insurance policies that some insurers refused to pay property damage compensation to third party claimants on the grounds that the insured failed to pay the Excess as specified.
Some insurers are of the view that failure to pay the Excess amounts to the insured’s breach of the above clause. Some opine that it constitutes a violation of another policy condition that requires the insured to provide all information and assistance to the insurer for investigating and defending a third party claim. Other insurers, however, have a different view. Having regard to the diversity of these views, the Insurance Authority has sought legal advice on this matter.
According to our legal opinion, a motor insurance policy is a contract of indemnity in that an insurer pays to the insured the loss that he has suffered, subject to the indemnity limit. If the loss is a valid claim, the insurer should indemnify the insured by paying him the amount necessary to settle the third party claim, or alternatively by making direct payment to that third party on behalf of the insured. Where the third party claim amount exceeds the indemnity limit, the insurer shall pay up to that limit, leaving the insured to deal with the balance.
The Excess is simply a deduction of the agreed amount from the payment the insurer is obligated to indemnify the insured. If the insured fails to pay the Excess, assuming that the insurer has made payment in respect of its obligation to a legitimate third party, the insured will remain liable to that third party. Generally, there is no policy provision to the effect that payment of the Excess by the insured to the third party claimant (or to the insurer) is a condition precedent to the insurer’s obligation to indemnify the insured. It follows that insurers are not entitled to insist upon the insured’s payment before they indemnify the insured.
Does the insured breach the policy condition that he will provide all information and assistance that the insurer requires in investigating and defending a third party claim? The answer is not. The “Claim Excess” clause is a provision to reduce the indemnity amount payable by the insurer. According to the legal opinion, it has nothing to do with the insured’s obligation under the above policy condition.
Intermediaries
Review of the Regulatory System for Insurance Intermediaries
Based on the responses received from earlier consultation with the self-regulatory organizations (i.e. the Hong Kong Federation of Insurers, the Insurance Agents Registration Board, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association Limited) (“SROs”) and other stakeholders, the OCI has compiled a list of proposed improvements for further industry consultation. These proposed improvements, representing preliminary views of various stakeholders, do not necessarily represent the OCI’s stance. The industry and the OCI however reach a consensus that refinements should be made to the existing self-regulatory system for insurance intermediaries to improve its effectiveness and efficiency.
The OCI has held separate meetings with the SROs and other insurance intermediary bodies. We are in the process of analyzing their further comments on the potential areas for improvement. The OCI will continue to work closely with the insurance industry to enhance the protection of policyholders.
Exchange
The Third CEO Insurance Summit
The Third CEO Insurance Summit, jointly organized by the Asia Insurance Review and the Geneva Association, was held on 25-26 March 2003 in Hong Kong. The theme of the summit was “Eyeing World Class Standards - The Asian Approach”. The two-day conference aimed to enhance mutual understanding and cooperation among insurance practitioners and regulators in the Asia Pacific Region.
The Secretary for Financial Services and the Treasury, Mr. Frederick Ma delivered a keynote speech on “Hong Kong - A Premier Insurance Centre in Asia”. On behalf of the International Association of Insurance Supervisors, the Commissioner of Insurance addressed the summit by introducing the association’s recent activities in promoting the international supervisory standards. To update the participants on Hong Kong’s insurance industry, Mr. Benjamin Tang further delivered a presentation on our specific regulatory challenges at a regulators’ panel.
The First and the Second CEO Insurance Summits were held in Singapore and Malaysia respectively.
The China Insurance Convention 2003
The Commissioner of Insurance, Mr. Benjamin Tang, attended the China Insurance Convention with a theme of “Exploring Opportunities in a Growth Market” held in Beijing on 26-27 March 2003. The two-day convention brought together global insurance experts and policy makers to explore the enormous business opportunities
after China’s accession to the World Trade Organization. During the convention, Mr. Benjamin Tang delivered a speech on “Roles of Hong Kong in Developing China’s Risk Transfer Market”. Mr. Tang took this opportunity to promote Hong Kong as an international business hub, catering for China’s increasing need for alternative risk transfer and arbitration services.
Promotion of Insurance Industry
Exhibition on Outstanding Customer Service
The OCI participated in the Exhibition on Outstanding Customer Service at the Central Library organized by the Civil Service Bureau. The exhibition, held on 20 – 23 February 2003, was aimed at introducing the various quality government services provided to the public.
To showcase the OCI’s functions, we set up an exhibition booth to introduce the insurance industry, explain our regulatory regime, and promote Hong Kong as a major international insurance centre. Apart from distributing souvenirs and educational pamphlets during the exhibition, we arranged shows of Announcements in the Public Interest (APIs), namely “Buying Insurance – What you need to know”, “Life Insurance Policy Replacement – What you need to know” and the new promotional video “Hong Kong – An International Insurance Centre” which were well received by visitors.
Promotional Video on “Hong Kong – An International Insurance Centre”
The Government is strongly committed to promoting the status of Hong Kong as a major insurance centre in Asia. To this end, the OCI has engaged a professional film producer to produce a new publicity video, “Hong Kong – An International Insurance Centre”.
The publicity video does not only introduce Hong Kong’s favourable business environment and world-class regulatory regime, but also our reinforced role as the
gateway to the fast-growing insurance market in China. The video is produced in three languages (i.e. Cantonese, English and Putonghua). Copies of the related VCD and DVD are being distributed to the international business community through the Government’s various Economic and Trade Offices overseas.
News Summary
a. Calendar of Events
Date Event
20-23/2/03 The OCI participated in the Exhibition on Outstanding Customer Service organized by the Civil Service Bureau. A debut video show on “Hong Kong – An International Insurance Centre” was arranged during the exhibition.
21/2/03 On behalf of the Government of HKSAR, the Commissioner of Insurance entered into an agreement with the newly established Employees Compensation Insurer Insolvency Bureau for the operation of the Employees Compensation Insurer Insolvency Scheme.
25/3/03 The Financial Services and the Treasury Bureau and the OCI participated in the Third CEO Insurance Summit in Hong Kong, organized by the Asia Insurance Review and the Geneva Association. 27/3/03 The OCI participated in the China Insurance Convention held in Beijing,
China. The Commissioner of Insurance delivered a speech on “Roles of Hong Kong in Developing China’s Risk Transfer Market” at the convention.
3/4/03 Insurance Companies Ordinance (Amendment of Part 1 of Third Schedule) Regulation 2003 and Insurance Companies Ordinance (Amendment of Part 8 of Third Schedule) Regulation 2003 came into operation.
b. Circulars Issued
Date Addressee Subject Matter
18/2/03, 19/3/03
Chief Executives of
authorized insurers carrying on long term business
Financial Action Task Force -
Non-cooperative Countries and Territories
18/2/03, 28/2/03, 5/3/03, 13/3/03, 20/3/03, 28/3/03
Chief Executives of all authorized insurers
United Nations (Anti – Terrorism Measures) Ordinance, United Nations Sanctions (Afghanistan) Regulation & United States Executive Order 13224
20/2/03 Chief Executives of
authorized insurers carrying on long term business
GN11: Guidance Note on Classification of Class C – Linked Long Term Business
24/2/03 4/3/03
Chief Executives of all authorized insurers
Release of Provisional Statistics on Hong Kong General Business and Long Term New Business and In-force Business for 2002
21/3/03 Chief Executives of
authorized insurers carrying on long term business
Insurance Companies Ordinance
(Amendment of Part 1 of Third Schedule) Regulation 2003 & Insurance Companies Ordinance (Amendment of Part 8 of Third Schedule) Regulation 2003
24/3/03 Chief Executives of
authorized insurers carrying on EC and motor insurance businesses
Difficulties encountered by some business sectors in obtaining employees’
compensation and motor vehicles third party liability insurance covers
25/3/03, 3/4/03
Chief Executives of all authorized insurers
Atypical Pneumonia
1/4/03 Chief Executives of
authorized insurers carrying on general business
Motor Vehicle Insurance Business
c. New Authorization
Date of
Authorization
Name of Insurer Place of
Incorporation
Type of Business
24/3/03 The Shipowners’ Mutual Protection and Indemnity Association (Luxembourg)
Luxembourg General
d. Withdrawal of Authorizations
Date of Withdrawal
Name of Insurer Place of
Incorporation
Type of Business
25/2/03 DBS Kwong On Insurance Company Limited
Hong Kong General
7/4/03 Reinsurance Australia
Corporation Limited
23/4/03 The Sumitomo Property & Casualty Insurance Company (H.K.) Limited
Hong Kong General
30/4/03 The Overseas Assurance
Corporation, Limited
Singapore General
e. Change of Names of Insurers
Date of Change Name of Insurer Place of
Incorporation
Type of Business
11/3/03 XL Winterthur International Insurance Company Limited
to
XL Insurance Company Limited
United Kingdom General
f. Portfolio Transfers
Date Event
9/4/03 The transfer of the general business carried on in Hong Kong by The Sumitomo Property & Casualty Insurance Company (H.K.) Limited to Mitsui Sumitomo Insurance Company (Hong Kong), Limited was approved under section 25D of the Insurance Companies Ordinance.
17/4/03 The transfer of the general business carried on in Hong Kong by The Overseas Assurance Corporation, Limited to Asia Insurance Company, Limited was approved under section 25D of the Insurance Companies Ordinance.
Market Performance of the Hong Kong Insurance Industry in the First Quarter of 2003
In the first quarter of 2003, the gross and net premiums of general insurance business recorded a growth of 7.9% to HK$6,870 million and 13.3% to HK$4,760 million respectively as compared with the corresponding period of 2002. The overall underwriting profit of general insurance business sharply improved from HK$77.5 million to HK$480 million.
Long term in-force revenue premiums collected by the insurance industry amounted to HK$16,971 million in the first quarter of 2003, an increase of 13.5% over the same period of 2002. The total insurance benefits paid to individuals during the said period increased by 4.0% to HK$5,297 million.
New business statistics showed that the long term insurance industry grew strongly in the first quarter of 2003. The new office premiums (excluding Retirement Scheme business) amounted to HK$4,516 million, a remarkable increase of 35.1% over the same period of 2002. Individual Life and Annuity (Non-Linked) business recorded an increase of 69.7% in new office premiums to HK$2,979 million. Individual Life and Annuity (Linked) business decreased slightly by 1.2% in new office premiums to HK$1,432 million.
Provisional Statistics on Hong Kong Insurance Business
January – March 2003
Insurance Market Structure as at 31 March 2003
Number of Authorized Insurers Number of Insurance Intermediaries
Long Term 46
General 129 Authorized Insurance Brokers 447
Composite 19 Registered Insurance Agents 30,656
Total 194 Total 31,103 Highlights 2003 1st Quarter (HK$ m) 2002 1st Quarter (HK$ m) General Business Gross Premiums 6,870 6,368 Net Premiums 4,760 4,203 Underwriting Profit/(Loss) 480 78
Long Term Business
Revenue Premiums (In-force Business) 16,971 14,959 New Business* Office Premiums
Composition of Premiums by Class of Business
General Business by Gross Premiums
Accident & Health 22%
Motor Vehicle 11%
Goods in Transit 4%
Property Damage 21%
General Liability 29%
Others 13%
Long Term Business (In-force Business) by Revenue Premiums
Individual Life & Annuity (Non-Linked) 57% Individual Life & Annuity (Linked) 17%
Other Individual Business 1%
Retirement Scheme Group Business 22%
Non-Retirement Scheme Group Business 3%
Premiums by Class of Business
Gross Premiums of General Business (HK$m)
Accident & Health 1,519
Motor Vehicle 768 Goods in Transit 264 Property Damage 1,435 General Liability 2,018 Others 866 Total 6,870
Revenue Premiums of Long Term Business (In-force Business) (HK$m)
Individual Life & Annuity (Non-Linked) 9,745
Individual Life & Annuity (Linked) 2,897
Other Individual Business 212
Retirement Scheme Group Business 3,657
Non-Retirement Scheme Group Business 460
Total 16,971
* New business includes single revenue premiums and annualized premiums, but excludes all contributions from retirement scheme business.
Statistics contained herein are compiled from statistical information provided by insurers in their quarterly returns to the Insurance Authority. The statistics are provisional and unaudited, and prepared on a calendar year basis. There is therefore a possibility of amendments before the final audited figures are produced. While due care is taken in the compilation of the statistics, the Insurance Authority disclaims any warranties or representations of any kind with regard to such information. More details of the provisional statistics are available for downloading at the OCI’s website.
