Topics in this section: - Hong Kong insurance's China reach may stoke M&A - Greater Bay a growth incubator for Hong Kong insurance - Insurers eye GBA's $10 Billion in accident, health premiums - Hong Kong insurers' M&A appeal to gain on 'insurance connect'
These analyses are by Bloomberg Intelligence senior analyst Francis Chan and contributing analyst Steven Lam.
The Hong Kong life insurance sector's M&A appeal could pick up as China promotes closer Greater Bay Area business ties. China's central government is pushing to allow qualifying banks and insurers in Hong Kong and Macau to set up operations in Qianhai, Nansha and Hengqin. This is likely to attract businesses seeking marketing springboards into mainland China. The GBA's integrated economy includes a sizeable insurance market on par with other top-tier Chinese cities, yet with greater growth potential than more-developed markets such as Hong Kong.
Insurers with a smaller mainland China presence -- such as FWD, Hang Seng Insurance, FTLife, Hong Kong Life, Tahoe and BEA Life -- may seek to widen their service areas. Life premiums amounted to $90 billion in the GBA last year, or roughly 1.6x Hong Kong's $55 billion.
Greater Bay a growth incubator for Hong Kong insurance
Hong Kong's life insurance business is likely to keep attracting startups and overseas rivals, as the city is favorably positioned for growth via a cross-border "Insurance Connect" Greater Bay Area sales mechanism. The 61.5 million people and $33 billion pool of life premiums in the nine cities surrounding the Pearl River Delta together dwarf emerging markets such as Thailand. Yet the region remains underpenetrated in life premiums per capita, at just $537 in 2018, or 7% of Hong Kong's $7,353.
Insurers eye GBA's $10 billion in accident, health premiums
AIA, AXA and Prudential are among the Hong Kong insurers with much to gain as China mulls an 'Insurance Connect' structure for the Greater Bay Area. Hong Kong insurers selling in parts of Guangdong province would probably prioritize protection-type products, with savings and investment-related policies coming later. Of the 10 largest life insurers by new annual premium equivalent (APE) in the city, AIA, AXA, China Taiping and Prudential all had more than 65% of their new APE from offshore clients in 2018, a barometer of their popularity beyond Hong Kong.
Accident and health premiums in the GBA -- excluding Hong Kong and Macau -- rose 35% annually during the five years through 2018 to 70 billion yuan ($10.4 billion). That compares to Hong Kong's new APE of HK$107.7 billion ($13.7 billion) in 2018.
Hong Kong insurers' M&A appeal to gain on 'insurance connect'
AIA, Prudential and other Hong Kong insurers could get a premiums growth boost if China okays an 'Insurance Connect' mechanism for the Greater Bay Area (GBA), allowing them to sell policies in a market of 70 million people, $90 billion in annual life premiums, and about $1.5 trillion in GDP. GBA sales would also enhance insurers' M&A appeal.
