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An Analysis of the Insurance Purchase Drive by Mainland Residents in Hong Kong and Tightened Policy Regulations(No.18, 2017)

( drc.gov.cn ) 2017-03-16

By Tian Hui, Institute of Finance, DRC

Research report No.18, 2017 (Total 5093) 2017-2-16

Abstract: Since the boom of insurance purchase by mainland residents in Hong Kong in 2005, the Hong Kong insurance market has taken the opportunity to obtain a high growth. There are a variety of reasonable motivations behind mainland residents’ insurance purchase in Hong Kong, including the pursuit of superior insurance product portfolios, well-defined function of tax evasion and better wealth management services. Since February 2016, the policies relating to mainland residents’ insurance purchase in Hong Kong have become tightened, and restrictive measures have been implemented. The relevant restrictive measures are mainly formulated by the Foreign Exchange Administrative Bureau, but not China Insurance Regulatory Commission. It shows that the tightened policy measures are formulated mainly from the perspective of capital flow, and has nothing to do with the opening-up policy of the insurance market. The formulation of these policy measures are necessary, but simply restricting insurance purchase beyond the mainland market cannot solve the problem that some insurance demands in the mainland cannot be fully satisfied, and might bring about some adverse consequences. Efforts need to be made to strengthen the supply-side reform of the mainland insurance market, enhance the quality of mainland insurance products and services, and encourage Chinese-funded insurance companies to go overseas to develop underwriting business.

Key words: take out an insurance policy, tightened policies, mainland residents, Hong Kong