Local insurers could offer products for people in the Big Bay Area as well as to help companies mitigate risks when investing in the Belt and Road countries, but what matters most is nurturing talent for the industry, says Asia Insurance chief executive Winnie Wong Chi-shun.
Her comments come in the wake of the insurance hub ambition stated by Financial Secretary Paul Chan Mo-po in his budget.
"It's not healthy that non-life insurance premium accounts for only around 10 percent of the total insurance premium in Hong Kong. An international financial center should be able to offer a wide range of life and non-life insurance products," says Wong, who is also a member of the Financial Services Development Council.
General insurance, or non-life insurance, has recorded low single digit growth every year and even booked a loss of HK$792 million in 2017 compared with a profit of HK$1.6 billion a year ago.
Having been in the industry for more than two decades, Wong says it is the first time in her career she saw an underwriting loss for the local general insurance market.
Wong joined Asia Insurance in 2016. It is a subsidiary of Asia Financial Holdings (0662), controlled by the family of Executive Council Convenor Bernard Charnwut Chan, who is president of the group.
The firm last year sold Hong Kong Life Insurance, a joint venture with four banks. But Chan has pledged to retain the general insurance business, noting its potential.
Wong says there are many Hongkongers living and working across the border, where insurers could offer products, although technical issues are yet to be overcome, including aligning the different legal systems.
Wong says Hong Kong is in a strategic position that can launch insurance products serving customers beyond the local market.
A case in point is Hong Kong China War Risk Syndicate, which is a marine insurance facility aimed at protecting Chinese and Asian ship owners from the risks of war and piracy. Launched in November, Asia Insurance will lead other local and Chinese insurers plus related parties to offer relevant products and value-added services.
She adds that many ship owners buy related insurance policies in London, where various types of insurance expertise are available. "It's more costly to buy insurance in London. We'll have Hong Kong lawyers create products that are subject to local law."
She says insurers can also facilitate the business of firms in rather remote markets. "I have heard at many 'One Belt, One Road' forums that people worry about various risks when investing in those countries but they rarely talk about solutions."
Wong says insurance products covering the risks of mergers and acquisitions as well as contractual deals could also be created.
"We could have insurance policies covering confiscation risks of mines. This will make it easier for firms to get bank loans."
Closer to home, Wong says the existing business has room for growth. For instance, typhoon Hato raised the risk awareness of corporate clients. "Even if corporations have insurance, they may not have bought enough. For instance, they have coverage for up to a maximum HK$3 million loss, while they have goods worth HK$10 million, with a HK$7 million protection gap."
She adds that profit generated from general insurance in Macau in the past 15 years had been wiped off by Hato, prompting Macau insurers to lose about HK$4-5 billion. The Hong Kong market was affected as more than half of the risks in Macau were reinsured back to insurers and reinsurers here.
As Asian Insurance has transferred the risks to reinsurers, she says the company did not incur a big loss from Hato.
Wong also sees opportunities in cyber security risks, especially in small and medium enterprises.
Meanwhile, she urges the government to offer tax incentives and the right regulatory environment to attract insurers.A bill on tax concessions for the insurance industry is to be passed in the Legislative Council.
"Due to policy inadequacies, some insurers have moved their Asian headquarters to Singapore, which offers tax incentives and capital for talent development,"says Wong.
"Insurance business does not have much geographical limitation and that explains why insurance industry in Singapore thrives."
In addition to insurers, Wong also hopes to see multinational corporations setting up captive insurance firms that provide risk mitigation to the parent or related companies.
She says Hong Kong has only three captive companies set up by mainland major energy groups, while Singapore has 65.
But to capture the potential opportunities, Wong says talent is essential. "We have different kinds of risks, which require experts from a diverse background to assess. Those who work in the marine and construction insurance, and claims management cannot retire at age over 65 or even over 70-80.
"The general mis-perception and misunderstanding of our industry prevent young talent from joining our profession."
The government has granted HK$46.3 million for the three-year pilot program to improve talent training that comprises education and internship opportunities.
"Not only does insurance support Hong Kong business, it also helps drive other professional services, as we need accountants, lawyers, investment veterans, and so on. We contribute to Hong Kong's economy," Wong says.