Insurance deals hit by UnionPay curbsBusiness | Daisy Wu and agencies 3 Feb 2016
China's foreign exchange regulator restricted mainlanders buying insurance products overseas by capping UnionPay debit and credit card payment at US$5,000 (HK$39,000) per transaction, effective from tomorrow, as it tries to stem outflows that topped US$1 trillion last year.
UnionPay International will now require merchants, including AIA Group (1299), Prudential (2378) and Manulife Financial (0945), to "follow the rules and enforce policies."
Many local insurance brokers have been calling their mainland customers since last night to purchase policies before the new payment limit becomes effective.
"UnionPay is the most favored way for mainlanders to buy local insurance policies, thanks to its convenience and no exchange control," an executive in charge of life insurance products at a local insurer said.
Mainlanders have been flocking to Hong Kong to buy insurance policies, which typically come with better service than in China and allow risk diversification, together with an avenue to move funds abroad.
The yuan has weakened 5.6 percent since a mid- price cut by China's central bank in August.
Critical Illness Protection, endowment insurance and universal life insurance are the favorites.
"Insurance purchase is also a way to shift [black] money, as insurance policies cannot be forfeited," an industry source said.
UnionPay said the limit for overseas insurance business has been in place, but some merchants failed to follow the rule.
"We just ask the merchants to follow the existing policy," the company said in a statement yesterday.
Purchases of insurance policies by mainland visitors to Hong Kong reached HK$21.1 billion between January and September following a 64 percent increase in 2014.
The government data also showed that mainland customers accounted for 22 percent of total contract value for the first three quarters last year, up from 9 percent in 2011.
The capital outflow control comes after HSBC (0005) stopped providing mortgages to some Chinese to buy US real estate two weeks ago.
Prior to that, China suspended Standard Chartered (2888) and DBS Group from conducting some foreign exchange business in the mainland.