The Insurance industry is facing a very difficult business environment because of the recent riot in the recent months. In addition to the new intermediaries guidelines and requirements, the compliance requirements are getting more tough in the coming years, including the RBC, ERM, IFRS17. We all understand the need to follow the international regulatory requirements and standards but we need to be competitive when compared with our competitors in the region. I have urged the Government and the IA to maintain a business friendly compliance environment.
The Government has responded positively to the request from the industry to turn HK into an international insurance hub. Initiatives mentioned in June included the following 5 inititatives: 1. Reduce profits tax rate by 50% for all reinsurance business of direct insurers, selected general insurance business of direct insurers and selected insurance brokerage business so as to encourage direct insurers to start or expand their reinsurance business. 2. Introduce a tax concession at 50% of the profits tax rate for direct insurers for their general insurance business that are relevant to the underwriting of marine-related risks or specialty risks under the prevailing market practice. 3. Introduce a tax concession at 50% of profits tax rate for licensed insurance broker companies in respect of their business of placing reinsurance risks and selected general risks placed with professional reinsurers or direct insurers in Hong Kong. 4. Legislative Amendments to facilitate the Issuance of ILS in Hong Kong 5. Expanding the scope of insurable risks by captive insurers set up in Hong Kong. I think these are good initiatives but there are still a lot to be done and I would welcome comments from the industry.
In order to turn HK into an international insurance hub, we need sufficient insurance expertises, especially experters with technical underwriting knowhow and skills for complicate insurance projects. HK used to underwrite domestic business but the Belt and Road and the Greater Bay Area initiatives open up huge opportunities for HK. I have urged the Government to set up an Insurance Academy for the development of local professional insurance experts.
Further to the Completion of the VHIS Legislation, the Legislative work regarding the Tax deduction for the voluntary MPF contribution and the Annuity products were completed in March this year. The original tax deduction proposed amount was set at HK$36,000. I and the Industry asked for increasing the amount to HK$100,000. Finally, the Government set the deduction limit at HK$60,000.
In Feb this year, the Central Government proposed the Guangdong HK Macau Bay Area development Plan, proposing to support cross boarder Motor and Medical insurance, support cross boarder RMB reinsurance and international Marine Insurance trading platform. I understand cross boarder business cannot be achieved in a short period of time. Therefore, the priority is to set up after sales Insurance service Centres and cross boarder Medical Direct and asked the Government to negotiate with the Central Government on these initiatives. In the longer term, I hope all HK registered Insurance companies can operate in mainland with requirements same as the local mainland companies.