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Insurance connect – A win-win initiative for insurance in the GBA

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The Greater Bay Area (GBA) Development Plan integrates Hong Kong, Macau, and nine mainland cities across the Pearl River Delta, and plans to unify science and technology, financial regulations, and even a certain degree of tax coordination in three different administrative regions. While the aims are to drive innovation, and create a high-tech economy and a financial centre offering different professionals, corporates, and industries a wide range of high-value goods and services; the end goal is to generate more business within the region, especially for the banking, finance, and insurance sectors.

Hong Kong’s insurance sector is one of the most mature markets in the region. According to the Insurance Authority, as of 31 March 2019, there are 162 authorised insurers1 and 96,115 registered persons under The Hong Kong Federation of Insurers. While the penetration rate of life insurance in the GBA region is still relatively low, we believe it could provide insurance companies with a huge market opportunity that has yet to be developed.

GBA opportunities for insurance companies

Excluding Hong Kong and Macau, the GBA mainland cities currently hold a population of 61.5 million and a total of USD 33 billion in life insurance premiums2, compared with Hong Kong’s total life premium at USD 55 billion with only a population of 7.5 million. The difference in life premiums per capita demonstrates a huge gap and significant growth potential for the insurance sector within the GBA region – in 2018 the GBA mainland cities stood at USD 537.00, only 7% of Hong Kong's USD 7,353.00. The expected wealth expansion along with the GBA development should provide a stronger demand and financial base for people to purchase insurance products.

Growing the insurance industry in the GBA

In the central government’s Outline Development Plan (ODP) for the GBA released in February 2019, insurance is expected to be a key industry. The ODP mentions different policy incentives to enhance connectivity within the GBA, with some aiming to help improve the operations of insurance companies. The policies were summarised and captured as follows:

GBA policy incentives for insurance industry

  • To support Shenzhen in creating a pilot zone for the development of insurance innovation, and further enhance the level of connectivity between the Hong Kong and Shenzhen markets.
  • Support insurance institutions in Guangdong, Hong Kong, and Macao to jointly develop innovative cross-boundary medical insurance products and provide facilitation services for cross-boundary policyholders in areas such as underwriting, investigations, and claims.
  • Progressively promote cross-boundary transactions of financial products such as funds and insurance within the GBA, continue expanding the types of investment products and channels, and establish a mechanism for mutual access to capital and products.
  • Support eligible Hong Kong and Macao insurance institutions in setting up operations in Qianhai in Shenzhen; Nansha in Guangzhou, and Hengqin in Zhuhai.
  • To support cooperation with financial institutions from Hong Kong and Macao, jointly develop offshore financial business in accordance with regulations, and explore the development of a trading platform for innovative insurance elements such as international marine insurance.

A SWOT analysis for the GBA insurance industry

Strengths
  • Hong Kong-GBA collaboration of international talent and local market for the insurance industry
  • Mainland is a leading force in adoption of insurance tech
  • New policy support for the new HK-GBA insurance connect initiatives
Weaknesses
  • A complex procedure for mainland Chinese to purchase Hong Kong insurance
  • High commissions charged by brokers
  • Government’s worries about capital outflow through insurance products
Opportunities
  • A huge population market with low insurance penetration
  • The highest concentration of wealthy individuals and families in China
  • Strong interest in Hong Kong & international insurance products by the market
Threats
  • Negative images to the insurance industry among the population
  • Low brand recognition for international insurance companies
  • Highly competitive market

‘Insurance Connect’ to bring new office demand

On the back of greater collaboration between Hong Kong and the other GBA cities, the Hong Kong Insurance Authority is pursuing the relevant Mainland authorities to enable Hong Kong insurance companies to set up service centres to facilitate cross-boundary services or products in the GBA through ‘Insurance Connect’.

Hong Kong insurance authority proposal:

Services: Allowing Hong Kong insurance companies to establish after-sales centres in the GBA.
Products: Develop innovative cross border motor/medical insurance products, a trading platform for innovative insurance products.
Channels: Exploring “insurance connect” to enhance cross-border insurance products catering for both Hong Kong and GBA residents.

The potential implementation of 'Insurance Connect' could further streamline the insurance process across the border, allowing mainland customers to settle premiums and process claims for their purchased insurance products within GBA cities. This would further strengthen Hong Kong’s role as a regional insurance hub and attracting more overseas and mainland insurance firms to set up or expand into Hong Kong to capture growing market demand. One he other hand, 'Insurance Connect' could allow after-sales centres in mainland cities across the GBA, encouraging insurance firms to expand and better serve their clients in these cities.

Expansion across the GBA is a key focus for Hong Kong based occupiers, in the Colliers’ Research report “Hong Kong Annual Occupier Survey 2019” published in June 2019, we asked the respondents about their future business plans in relation to GBA initiatives – 14% of Hong Kong office occupiers indicated that they would like to expand into the other GBA cities, while another 20% indicated that they would like to expand their local footprint in Hong Kong. If we take the total occupied space in Hong Kong for Grade A office space – 90 million sq ft GFA, as proxy, expansion into other cities could be the equivalent of 13 million sq ft GFA in new office demand in GBA cities, and another 18 million sq ft GFA organic expansion in Hong Kong.

A win-win prospect

The potential for ‘Insurance Connect’ should point towards a win-win prospect for office markets in Hong Kong and other GBA cities. The initiative is expected to generate new demand for office space in the region, based on new expansion requirements from insurance companies looking to capture more market share. This is particularly the case for office submarkets close to intra-city transportation links and infrastructure points, areas which should see a greater upside growth potential for office rents and prices.

If you would like to find out more about the GBA, the insurance sector in the region, and what new opportunities exist, please contact Rosanna Tang at Rosanna.tang@colliers.com

This article was originally featured in our Office Insider publication, if you would like to read the latest issue, please click here: Office Insider Aug-Sep 2019

1 Source: Insurance Authority
2 Source: Bloomberg



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Rosanna Tang

Head of Research, Hong Kong & Greater Bay Area

Research

Hong Kong

Rosanna Tang leads the research team in Hong Kong and South China in Colliers. Driving different research papers and client-orientated initiatives, Rosanna has a deep understanding of all property sectors, research products, and client requirements. Rosanna is also one of the spokespersons in the company, and she frequently speaks in different industry events and media interviews. 
 

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