Policy support and RBC to help insurers tackle emerging challenges: Michael Wong
September 24 2024 by InsuranceAsia News
The government has introduced policies and a new capital regime to help the sector tackle these challenges, said acting financial secretary Michael Wong inaugurating EAIC 2024.
While Hong Kong remains one of the most open and dynamic insurance hubs of the world as evident by the high penetration rate, emerging risks from climate change, economic uncertainties and new technology are presenting as much challenges as opportunities to practitioners, said acting financial secretary Michael Wong Wai-lun.
The government has introduced a number of policies and infrastructure to help the sector tackle these headwinds, as it remains committed to working with the industry to bolster the sector’s resiliency, Wong said.
Wong was speaking at the inauguration ceremony of the East Asian Insurance Congress 2024 in Hong Kong. The 30th edition of the biennial conference, and the third to be held the city, has attracted over 1,000 delegates from 31 countries who will be participating in the four-day conference that will run until September 27. It is the first in-person EAIC conference since the Covid-19 pandemic.
With the highest insurance penetration rate in the world at 70.2%, the city has attracted a diverse pool of insurers, said Wong.
“While Hong Kong remains the world’s most open and dynamic insurance sectors, we must also be prepared for challenges ahead, given fast evolving landscape of risk, opportunities, and technology,” he said.
To address the challenge from climate change, the Hong Kong government has been proactively introducing policy incentives to promote the city as a hub for insurance-linked securities (ILS), such as cat bonds.
To entice issuers, an ILS grant scheme was introduced in the city’s 2021-22 financial budget, he said. The scheme covers up to 100% of the upfront issuance costs and is subject to a cap of HK$12 million. That scheme has been extended until May 2025. The regulatory regime for ILS has also been streamlined.
The sector is also challenged by economic uncertainty, he said, adding “there is a need for insurers to better handle risks and as resilient as possible”.
Since July this year Hong Kong has implemented the new risk-based capital (RBC) regime, which provides a more risk-sensitive assessment for capital adequacy.
“This risk-based regime would strengthen resilience of the sector, and help the industry to effectively enhance the protection for policyholders,” he said.
Tech innovation such as artificial intelligence and digital platforms are drastically changing the way that insurers perform their underwriting, process claims, and deliver their services, he said.
With insurtech, many insurers are proactively seeking to collaborate with fintech firms to develop new products and tools to serve the needs of different parts of the insurance value chain.
“Insurtech will have a bright future. The government is committed to facilitating further development [on this front],” he said, noting the over 1,000 fintech companies and start-ups in the city, some of which specialise in insurtech.
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