Hong Kong has been making a recent, concerted push to develop its status as a captive domicile. As well as a bill aiming to slash the tax on captive profits by half, with help from the Inland Revenue, the Government and the Hong Kong Federation of Insurers held a workshop on captive insurance at the Asian Financial Forum on 14 January.??
Speaking at the workshop, the permanent secretary for financial services and the treasury for the Hong Kong government, Au King-chi, said: "The government has renewed its efforts to broaden Hong Kong's insurance market. In particular, we are introducing measures to promote Hong Kong as a domicile of captive insurers."??
“To this end, we are delighted that the central people's government is encouraging mainland enterprises to set up captives in Hong Kong so as to enhance their risk management. Alongside this national policy, we are amending our tax law to cut profits tax of the business of offshore risks of captives by half, starting from the current tax assessment year of 2013-2014."
The Inland Revenue (Amendment) (No. 3) Bill 2013 was introduced into the Legislative Council on 8 January 2014.??
"While widely adopted by multinational corporations in the US and Europe, captive insurance is relatively underutilised in Asia. That is why we had the idea of organising this workshop during the Asian Financial Forum. We hope to put the spotlight on insurance and stimulate more discussions on captive insurance in Hong Kong," she added.??
Attending the workshop as panellists were James Wong from Aon Global Risk Consulting in the Pacific, the CEO of Peak Reinsurance Company Franz Josef Hahn, and the assistant commissioner of insurance Ros Lam. Managing director of Jardine Lloyd Thompson, Nick Cousins, was the moderator at the workshop.??
Wong said: "The reasons for corporates to form captives are saving from insurance expenses, strategic risk management and cash-flow management. Financial institutions, health-care services industry and manufacturing industry are heavy users of captive insurance."??
Hahn said that reinsurance could absorb the excess risk exposure from captives through risk transfer. "Hong Kong's advantages as an insurance hub are robust legal and regulatory systems, and easy access to other markets in the region."
Lam emphasised that the process for applying for authorisation of a captive insurer could be completed within three months, and the annual fee for captive insurers is only $22,600.??
In his concluding remarks, deputy chairman of the Hong Kong Federation of Insurers, Jimmy Poon, said: "The Hong Kong Federation of Insurers has set up a Task Force to steer the promotion of Hong Kong as a captive insurance hub. With all the infrastructure and expertise we have in our market, together with the proactive support of the Hong Kong Government with tax concessions as the first step, we are well equipped to bring this forward."??
The application procedure for a captive insurer to operate in Hong Kong can be found here
