Cross-border transactions of insurance products within the Guangdong-Hong Kong-Macao Greater Bay Area are in the pipeline, using a model similar to that in the transaction of stocks and bonds.
The research and development of the "insurance connect"－a special channel for the marketing, sales and processing of insurance products between the Chinese mainland and Hong Kong－is in progress, Moses Cheng Mo-chi, Hong Kong Insurance Authority chairman, told a forum in Hong Kong on Monday.
He said the long-anticipated insurance connect would follow the framework of the Stock Connect and Bond Connect, which is relatively closed.
Capital outflow has been the key concern since the insurance connect was proposed. To avoid that and prevent illegal activities, terminal bonus and insurance payouts must be returned to the mainland in their full amount, Cheng noted.
The idea of the insurance connect was proposed by Cheng and Insurance Authority Chief Executive John Leung Chi-yan to the mainland's banking and insurance regulator China Banking Insurance Regulatory Commission during a meeting last May. It received better-than-expected feedback from their mainland counterparts.
Cheng said Hong Kong's insurance companies will be allowed to sell some products with a simple structure and high guarantees under the pilot in the bay area.
"It will not only meet the financial needs of mainland residents, but also boost the innovation of Hong Kong insurance products," he added.
Chan Kin-por, a lawmaker for the insurance sector in Hong Kong, said simple life policies and medical products could be suitable to be sold via the insurance connect.
Hong Kong Secretary for Financial Services and the Treasury James Lau said mainland residents are quite interested in insurance products related to people's livelihoods, such as motor vehicles and medical products. He said these products in Hong Kong are relatively comprehensive in their premium, coverage and settlement procedures.
The bay area's development plan, unveiled earlier this year, supports insurance institutions in the region to jointly develop innovative cross-border motor vehicle and medical insurance products. The document suggests that facilitation services could be provided for cross-border policyholders in areas such as underwriting, investigation and claims.
According to the blueprint, financial connectivity among cities in the bay area will be stepped up progressively. The types of investment products and channels are encouraged to be expanded continuously.
Lau said it would be ideal for the insurance connect to be implemented first as part of mutual access to financial products between Hong Kong and other bay area cities. He said the insurance products would be relatively easy to operate, compared to other financial products.
Ng Keng-hooi, chief executive and president of AIA Group, told reporters when releasing its latest annual results that the company plans to set up service centers in the bay area. Leveraging its wholly owned companies in the mainland and Hong Kong, he is confident it can seize opportunities in the region.