The report states Hong Kong has seen double-digit growth annually since 2010 in terms of new business premium in direct individual businesses, and has been the fastest-growing life insurance market among developed markets within Asia.
Data shows that premiums on new business from the Hong Kong life insurance market increased to HKD31.6bn (£3.12bn, €3.6bn, $4.04bn) in 2015 from HKD4.4bn in 2010, and accounted for 24% of new individual business, compared with 7.5% in 2010.
The growth is likely to be down to Chinese citizens purchasing offshore insurance products in the city-state as a vehicle for holding individual wealth since China began devaluing the renminbi in August last year. The currency fell to RMB6.67 ($1, £0.76, €0.9) from RMB6.21 on August 2015.
However, the study predicts that couple with rock-bottom interest rates and weak domestic demand the level of growth is unsustainable as Chinese authorities continue to crackdown on channels allowing citizens to move large amounts of money offshore.
“A.M. Best expects growth rate to slow down as the Hong Kong domestic market is already one of the most penetrated markets in Asia.
“It is also challenging for life insurers to raise the guaranteed rate to attract new customers due to the current low interest rate environment.
“Life insurers may have to lengthen their product duration in order to offer more attractive rates,” said the report entitled Hong Kong’s Life Business Facing Headwinds on New Growth.
China allows individuals to exchange up to $50,000 a year into foreign currencies but the State Administration of Foreign Exchange (Safe) but earlier this year the regulator sought to limit the use of Chinese-issued credit cards to buy expensive insurance policies abroad by enforcing a $5,000 cap on the purchase of financial products via the country’s state-controlled card monopoly, China UnionPay.
The China Insurance Regulatory Commission (CIRC) warned in April that Hong Kong insurance products are not protected under mainland law in a bid to discourage mainland Chinese citizen’s from using insurance products to funnel money out of the country.
Last month, one of Asia’s largest insurer AIA reported a whopping 60% growth in the value of new business from mainland China as regulators struggle to stem the flow of personal wealth leaving the country via Hong Kong’s offshore insurance industry.
This compares to other life markets in the region which have been facing a slowdown in growth for years.