AIA, Manulife and Prudential all saw their shares fall sharply as a result of the reports which claim that from 4 February China’s State Administration of Foreign Exchange will impose a $5,000 limit on using the popular UnionPay debit and credit card to pay for insurance premiums.
A slowing economy and a slide in the yuan has been fuelling record capital outflows from China, causing the Chinese authorities to step up efforts to restrict cross-border fund flows.
According to Bloomberg News, Chinese people have been flocking to Hong Kong to buy insurance policies, which typically come with better service than on the mainland, with the purchases by mainland visitors in Hong Kong reaching HK$21.1bn ($2.7bn) by the end of September last year, following a 64% surge in 2014.
The news agency said purchases through UnionPay cards had been exempt from capital controls that limit Chinese individuals to bringing out a maximum of $50,000 per year.
UnionPay International said in a widely reported statement that insurance has always been under its overseas restrictive category, which has a limit of $5,000 for each transaction conducted via bank cards issued in China.
As the reports of new insurance payment rules came to light, shares in major insurance companies that do a lot of business with Chinese nationals were hit hard.
AIA, the largest listed pan-Asian insurance group which derives more than a fifth of its revenue from Hong Kong, closed down 4.9% after falling as much as 9.4% during the trading session.
By late morning in London, Prudential shares were down nearly 5% after dropping as much as 8.2% on Tuesday.
Canadian-based Manulife Financial Corp’s Hong Kong listed shares closed down 5%.