Reinsurance / Specialty
To strengthen Hong Kong's role as a global risk management center and regional insurance and reinsurance hub, the Insurance Authority ("IA") strives to enhance the breadth and depth of our insurance industry. Reinsurance and specialty insurance are crucial elements for the comprehensive development of the insurance industry.
Reinsurance
The formalisation of the preferential treatment under the China Risk Oriented Solvency System ("C-ROSS"), as agreed between the IA and the National Financial Regulatory Administration (NFRA), encourages Chinese Mainland insurers to give priority to eligible Hong Kong professional reinsurers when they consider ceding business offshore.
On top of the preferential treatment above, the reinsurance business of onshore and offshore risks by professional reinsurers authorized in Hong Kong enjoys a 50% concession in the profits tax rate.
Protection and Indemnity ("P&I") Insurance
Hong Kong, as one of the international maritime centers and the fourth-largest ship registry, is the gateway to China, where seven of the world's top 10 container ports are located. China also has the world's second largest commercial fleet by value.
Capitalizing on the strength of Hong Kong's maritime industry and to enhance its position as an international maritime center, the IA is working to expand the inward reinsurance market from Chinese Mainland and overseas, while looking to attract new marine insurers to operate in Hong Kong. The IA has exempted marine insurers from certain regulatory requirements, and actively organizes events such as the P&I Forum and keeps a close dialogue with various marine insurance stakeholders.
Captive Insurance
With its traditional strength in financial services and risk management, Hong Kong is ideally positioned as a captive domicile for state-owned and privately-owned enterprises of Chinese Mainland, as well as multinational conglomerates with significant presence in Asia.
While eligible authorized captive insurers in Hong Kong may benefit from a concessionary profits tax rate of 8.25% (i.e. 50% of the 16.5% corporate profits tax rate) on qualifying profits from their authorized captive insurance business1, various regulatory facilitation measures are also in place to incentivize corporates to establish their captives in Hong Kong, including simplified capital requirements, exemption from appointing a certifying actuary, exemption from the requirement for maintaining assets in Hong Kong to match local liabilities, and flexibility in key personnel arrangement.
1 Under the international tax reform spearheaded by the Organisation for Economic Co-operation and Development (“OECD”) on base erosion and profit shifting (commonly known as BEPS 2.0), the actual tax benefits available may vary depending on the overall effective tax rate in Hong Kong applicable to the captive insurer’s multinational enterprise (MNE) group. Please refer to the Hong Kong Inland Revenue Department’s guidance and obtain professional tax advice as appropriate.
Specie Insurance
To support the Government’s drive to build a full-chain gold trading ecosystem in Hong Kong, the IA has coordinated with international, Chinese Mainland and local insurers to provide specie insurance, tailored insurance solutions for high-value precious metals for global market participants.
Typically, specie insurance is designed to protect precious metals against physical loss, damage, or theft while they are stored in vaults, on display, or being transported globally. Sourcing specie insurance in Hong Kong offers distinct operational advantages, including access to underwriters with deep expertise in the city's security infrastructure, as well as bespoke coverage that integrates with Hong Kong's robust legal system.
Insurance-linked securities ("ILS")
ILS are risk management tools that allow insurers and reinsurers to seek alternative capital by offloading risks to the capital markets through securitisation. Given a rising trend of catastrophic events caused by climate change and urbanisation, the global issuance of ILS has grown substantially in recent years but currently the risk exposure of such ILS is mainly confined to the United States and Europe. It is necessary to make Hong Kong a more conducive domicile for ILS to capture potential business opportunities expected to arise in Asia.
The Insurance (Amendment) Bill 2020 was passed by the Legislative Council on 17 July 2020 and commenced operation on 29 March 2021. The amendments provide for a legislative framework for the authorization of Special Purpose Insurers for the purpose of ILS issuance and Rules to restrict the sale of ILS to eligible, essentially qualified institutional investors. To encourage market development, a two-year Pilot ILS Grant Scheme was first rolled out by the Financial Secretary in February 2021 to attract insurance enterprises and other organisations to issue ILS in Hong Kong. The Grant Scheme was extended for three years until 2028 as announced in the 2025-26 Budget. The objective is that over time this will help establish a self-sustaining ecosystem of ILS business activity in Hong Kong, and thereby building a firm foundation for the future development of ILS in Hong Kong.
These initiatives would maintain Hong Kong's competitiveness as a global risk management center and regional insurance hub.