“The Hong Kong market is growing very strongly,” Campbell said. “The life insurance market from 2009 to 2016 had about 20% annual growth throughout this period.”
Non-residents accounted for 40% of all new business sales in 2016. Data from NMG Consulting showed the despite new business sales rising every year between 2009 and 2016, the offshore insurance companies’ market share has fallen dramatically and consistently.
Legislation called Guidance Note 15 (GN15) was introduced in January 2015, with the aim of driving poor practice and bad brokers from the market. While this impacted the industry, offshore insurance companies had been experiencing declines for some time.
No fish
Campbell interviewed a broker several year ago in Hong Kong who was doing well on the back of cross-border business.
“He told me that in order to understand why he was doing do well he wanted to teach me this Chinese phrase ‘in clear water there are no fish’.”
The broker said that if he followed the regulations governing what he could and couldn’t do, if he read them all in black and white, there wasn’t great opportunity for him. “What he found was that if he was willing to look where regulation is unclear and uncertain, if he is willing to play in areas that other people are not willing to play in, then there were very strong opportunities.
“So the whole mantra of his business is to play in the muddy waters not in the clear waters.”
Strong domestic growth
In China, Hong Kong insurers are prohibited from soliciting and advertising, meaning that Chinese customers have to physically be in Hong Kong to buy insurance products and pay premiums.
“There are so many rules and restrictions that should be limiting this market but the market is growing very strongly,” Campbell said. “I think it’s fair to say that not all the rules and restrictions are always being followed.”
But its’s the domestic players that have benefitted, while the offshore insurance companies have lagged behind.
The failure of the offshore companies to pick up the wave of cross-border business surprised Campbell.
“The business model of offshore insurance companies was about handling complex cases across jurisdictions. But it’s the local companies that have picked up all this wave of cross-border business.”
There is a view that the cross-border business isn’t something that these companies want, Campbell said. “There are some blocks of business from these channels that have been very poor. And some insurance companies in Asia and Hong Kong have been burned quite badly.”
While he agrees that parts of the business are a bit dangerous; Campbell believes that, with the right products and distributers, there are very strong opportunities in the cross-border industry.
