Life insurers face new business slump, S&P says

S&P Global Ratings predicts that Hong Kong's life insurers could face a slump in new business volumes this year despite the regulator's recent measures to cushion an industry plunge, which could be the first contraction in a decade.

The sector's growth prospects are dented by ongoing travel restrictions, intensifying economic recession, and rising unemployment rates, said the rating agency.

S&P expects total premiums in the Hong Kong life insurance market to slide 5-10 percent year-on-year in 2020, with an estimate that new-business activity could drop over 30 percent and the renewal rate would be stable.

The rating agency estimates a roughly 70 percent decline in new business related to mainland Chinese visitors amid tighter border controls.

The sector's profitability is likely to weaken given the sharp rout in investment markets and a global recession, said S&P.

It forecasts the sector's return on assets will halve to just 0.7 percent in 2020 from historical levels. Life insurers are expected to strengthen reserve provisions because of the impact of flat yield curves, further contracting their capital buffers, said S&P.