[ET Net News Agency, 1 April 2020] Hong Kong's life insurers face a slump in
new-business volumes in 2020 despite the regulator's recent measures to cushion an
industry plunge. The sector's growth prospects are dented by ongoing travel restrictions,
intensifying economic recession, and rising unemployment rates, according to S&P Global
Ratings Credit.
"Revenue and profits will be pressurized in 2020 for Hong Kong insurers due to the
challenging operating conditions that have been exacerbated by the COVID-19 outbreak, a
flat yield curve, and volatility in capital markets," said S&P's credit analyst Judy Chen.
"The regulator's temporary measures to temper the pain haven't gone far enough."
The Hong Kong Insurance Authority (HKIA) recently allowed more insurance products to be
distributed through methods that don't involve face-to-face contact. This move signifies
to us the heightened pressure on the industry.
S&P expects total premiums in the Hong Kong life insurance market to slide 5%-10% year
over year in 2020. This assumes new-business activity drops over 30% and the renewal rate
is stable. The agency estimated a roughly 70% decline in new business related to mainland
Chinese visitors amid tighter border controls.
The sector's profitability is likely to weaken given the sharp rout in investment
markets and a global recession. S&P estimated the sector's return on assets will halve to
just 0.7% in 2020 from historical levels. It thinks life insurers will strengthen reserve
provisions because of the impact of flat yield curves, further contracting their capital
buffers. (KL)