The HK RBC regime came into effect on 1 July and will be interesting to see how this will change the product landscape for insurance moving forward.
% share of wallet by product category for Q1 2024 Life data as follows :
i) 98.86% : Class A (Traditional / Long Term Insurance, including Annuities)
ii) 1.11% : Class C (Linked Long Term Insurance)
iii) 0.03%. : Class D (Permanent Health Insurance)
Class A Life products contributes to a majority of the HK market, although some insurers chose to transition to the RBC regime through new product launch pricings and illustrations in the year prior.
Some observations on the changes include a much higher non-guaranteed projections vs the legacy products. Total premium breakeven projections have also been brought forward. But this means that consumers will take on more risk of non-guarantees, and product fulfilment ratios may become a talking point in future, depending on how respective traditional fund performs and when customer complaints start coming in, especially for cases of legacy non-fulfilment. Importantly, there should be oversight on future surrender trends as well.
Unlike Singapore, ILPs Linked business contribution of 1% is still non-material for now. This is mainly contributed by the Agency channel and slightly over 20% coming from banks. For the latter, there are very specific product design requirements to meet before approvals can be garnered for sales in bank branches. There may be further evolution of the Linked product designs as the RBC regime becomes more entrenched, coupled with industry-regulator dialogue and engagement. However, consumer and VC protection will still be top of mind.
Q2 data should tell us if there has been any jump in sales volumes leading up to the shift to the RBC regime. However, with most of the top 10 insurers repricing their new product launches earlier in 2023 in anticipation, the impact may be muted. Let's review the stats when it comes out in Q3.
We may also see a shift towards single premium / multi-pay HNW products as more wealthy offshore individuals are attracted to the SAR and this will only grow with the maturing Family Office scene, GBA evolution, recovering Mainland economy and as interest rates start to reduce.
Interesting times.
The Risk-based Capital regime (#RBC) for the Hong Kong #Insurance industry has come into operation today, marking a significant milestone for the industry, enhancing protection for policy holders and solidifying the city’s role as a global insurance hub.
The implementation of the RBC regime will strengthen the financial soundness of insurers in Hong Kong by taking a modular approach for an assessment more sensitive to each insurer’s risk profile while providing closer alignment with international standards.
#IA #InsuranceAuthority #RiskBasedCapitalRegime #FinancialResilience
Senior Communications Manager, Wealth and Personal Banking Asia Pacific
2moCongratulations Daisy and team HSBC Life Hong Kong!❤️🎉