Betting on Insurance
21 May 2014
QBE Insurance is Hong Kong’s second-largest company for general insurance, according to the Office of the Commissioner of Insurance. It is also tops in the employee compensation business and second in the mortgage insurance business. With a presence in 16 regional markets, QBE Asia Pacific generated US$730 million of gross written premiums in 2013, and US$87 million in profit, a growth of 26 per cent and 32 per cent respectively, year-on-year. David Fried, CEO of QBE Asia-Pacific, explains the region’s importance to the group’s global business – and Hong Kong’s role.
Why the focus on the Asia-Pacific region?
Asia-Pacific is identified as a profitable growth engine for QBE’s global business because of its enormous potential. With a total population of 3.13 billion and an annual GDP of US$12.7 trillion in 2012, the GDP growth rate in the ASEAN countries and developing Asia is forecast in to be in the range of 4.5 and 6.7 per cent between 2014 to 2018. Over the last decade, Asia’s non-life premium has grown from US$154 billion in 2003 to US$350 billion in 2013, a compound annual growth rate of 10 per cent, demonstrating an upmarket cycle through financial crisis and outpacing the growth in Europe and the United States.
How can Hong Kong help you tap that potential?
Hong Kong is a top priority market of QBE Asia-Pacific operations. We have a long history of more than a century in the city. While Hong Kong has grown into an international financial centre, as well as a trading and service hub in the region, QBE in Hong Kong has also expanded our general insurance product portfolio to meet the growing non-life insurance-protection needs.
Over the years, we have developed a wealth of local knowledge and expertise. We have also built very strong partnerships with professional insurance intermediaries. This gives us unparalleled advantages in understanding our customers in Hong Kong.
Can you break that down in numbers?
Despite the past strong growth recorded in Hong Kong, insurance penetration is low. In 2012, the general insurance market produced about US$5.2 billion in gross written premiums, contributing two per cent of Hong Kong’s total GDP of US$243.7 billion. The general insurance business has been consistently profitable since 2002, with net combined operating ratio generally running about 90 per cent.
What are the key growth drivers for your business in Hong Kong?
Commercial is one: we see a strong pipeline of infrastructure projects in Hong Kong amid a stable economic outlook, with positive GDP growth rates, in the next three years. Another is trade flow, leading to growth in marine and trade credit insurance. Today, the intra-regional trade flows between Asian economies are greater than to the Western world. Hong Kong has always been a major trade hub in Asia, which has led strong growth in the marine sector. With its strong distribution network and solid experience, QBE, both in Hong Kong and Asia, is well-positioned to capture the increasing market opportunities in marine insurance.
A third growth driver is retail. Rising affluence translates into rising demand for general insurers, such as home contents insurance.
Why do mainlanders come to Hong Kong for insurance, and why is that an increasing trend?
Mainland Chinese customers choose to buy insurance products in Hong Kong because of the comprehensive range of insurance solutions and better features: a stable return from savings-type life policies; a choice of policies denominated in US dollar, Hong Kong dollar or renminbi currencies. Buying Hong Kong insurance also allows them to spread their investment risks and help to transfer their assets offshore, while offering and for better care from medical insurance.
We have already seen a significant increase in the uptake of insurance by mainland customers in Hong Kong. The total insurance spending by mainland customers was US$1.92 billion in 2013. As far as new life insurance policies issued in Hong Kong are concerned, 16 per cent of them were sold to mainland Chinese in 2013. That’s compared to 13 per cent in 2012; nine per cent in 2011; and four per cent in 2010. The size of their life policies is also huge; some mainland Chinese high-net worth individuals want to buy as much as US$12 million in life insurance policies.
What’s the future of Hong Kong’s insurance business?
We are confident because the city’s advantages remain strong. Hong Kong is not only an international financial centre, but also a business, trading and services hub in the region. It has a strong and well-regulated financial sector and an increasingly affluent consumer market with about 114,000 high-net worth individuals. Hong Kong’s capital account is fully convertible, and there are no restrictions on foreign exchange dealings.
Other advantages are Hong Kong’s legal system, trusted, tried and tested by international business, a capital account that is fully convertible, low taxes and a simple taxation system, proximity to other major markets, a free press and free flow of information.
- Finance & Investment
- Hong Kong