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Insurance Authority releases provisional statistics of Hong Kong insurance industry in the first quarter of 2020

29 May 2020

The Insurance Authority (IA) today (29 May 2020) released provisional statistics of the Hong Kong insurance industry for the first quarter of 2020, indicating a growth of total gross premiums by 10.9% to $165 billion over the corresponding period in 2019.

(Percentage changes in brackets represent changes over the corresponding period of last year)

Long term business

Total revenue premiums of in-force long term business were $146.7 billion in the first quarter of 2020 (increased by 11%), mainly comprising $124.4 billion of Individual Life and Annuity (Non-Linked) business (increased by 7.3%), $6.4 billion of Individual Life and Annuity (Linked) business (decreased by 2.7%), and $13.9 billion of Retirement Scheme business (increased by 72.7%).

On the other hand, new office premiums (excluding Retirement Scheme business) of long term business were $35.1 billion (decreased by 27.5%), made up of $32.5 billion related to Individual Life and Annuity (Non-Linked) business (decreased by 28.8%) and $2.5 billion from Linked business (decreased by 6.2%).

One year after the launch of Qualifying Deferred Annuity Policy (QDAP) in April 2019, around 133,000 such policies have been sold as at the end of March 2020, contributing total premiums amounting to $9.4 billion. The average age of policy holders is 47.5, while the average annualised premiums per policy are around $71,000. Some 36,000 QDAPs worth $2.5 billion were issued in the first quarter of 2020, representing 7.3% of total new office premiums for individual business.

New office premiums in respect of policies issued to Mainland visitors were $5.4 billion (decreased by 57.7%), constituting 15.5% of total individual business. Restrictions imposed on cross-boundary passenger traffic to contain the COVID-19 outbreak caused premiums to contract by 27% on a quarterly basis. Critical illness, whole life and medical products continued to dominate as before, representing 48%, 37% and 4% of new policies taken out by Mainland visitors respectively. About 98% of policies were settled at regular intervals, i.e. non-single premiums.

General business

The gross and net premiums of general insurance business in the first quarter of 2020 were $18.3 billion (increased by 10.1%) and $12.2 billion (increased by 7.4%) respectively. The overall underwriting profit rose from $44 million to $329 million, propelled by better performance of direct business and a significant turnaround in reinsurance inward business.

On direct business, gross and net premiums were $13.9 billion (increased by 9.3%) and $9.4 billion (increased by 6.3%) respectively, where the growth rate on a gross basis was broadly on a par with the corresponding period last year. Benefitting partly from the introduction of standard wage roll declaration since 1 January 2018, gross premiums of General Liability business went up by 17.3% to $3.1 billion. Furthermore, gross premiums derived from Pecuniary Loss business surged by 76.6% to $700 million on the back of additional demands arising from an upward adjustment of maximum property values under the Mortgage Insurance Programme. The growth rate of Accident & Health (A&H) business slowed down to 4.2% from 11.3% in the first quarter of 2019, with the Medical subclass still increasing by 6.5% but the Non-medical subclass dipping by 11.4% due to reduced outbound travel.

Direct business generated an underwriting profit of $304 million (increased by 4.2%), with A&H business showing a profit of $177 million (increased by 79.4%) as a result of lower claims amidst the COVID-19 outbreak. Employees’ Compensation business recovered from a loss of $14 million to a profit of $39 million, and the loss of Motor Vehicle business improved slightly from $48 million to $31 million. However, an anticipated economic downturn and volatile investment environment will put mounting pressure on the industry going forward.

On reinsurance inward business, the gross and net premiums were $4.3 billion (increased by 12.9%) and $2.8 billion (increased by 11.1%) respectively, accelerated by capacity tightening and hardening of rates. The underwriting result rebounded strongly from a loss of $248 million to a profit of $25 million, on account of favorable claims experience in General Liability business and Goods in Transit business.

A summary of the provisional statistics is provided at annex, and further details could be obtained at the IA website.