Lyndsey Young reviews the 2022 Asian Insurance Forum, where panellists and delegates looked back on the last three years and discussed their optimistic outlook for the region’s future
Hong Kong holds a reputation for being the financial, trading and business centre in Asia, with a sophisticated business environment, respected legal system and a resilient, resourceful workforce. It boasts a simple tax regime with a corporate tax rate as low as 16.5 per cent, while the maximum rate of personal income tax is only 15 per cent. According to the Hong Kong Insurance Authority, the current strategic vision is to reshape Hong Kong into a regional insurance hub and global risk management centre, through the building up of a robust insurance ecosystem.
Blueprints to build on this understanding were discussed at The Asian Insurance Forum (AIF), the annual flagship event of the Insurance Authority (IA), which took place on 5 December 2022, with the theme of “Reflect, Reset, Revive for a Resilient Future”.
Around 1500 participants joined the speakers to take a deep dive into subjects relevant to the future development of the insurance industry, which in turn impacts Hong Kong’s status as an international financial centre.
Stephen Yiu, chairman of the IA said in his opening remarks: “The theme this year is carefully chosen, since various parts of the world are resuming normality from the COVID-19 pandemic in accordance with its own pace.
“The insurance industry has demonstrated remarkable resilience and versatility amid the pandemic, offering appropriate and affordable products to shield members of the public from unexpected perils caused by prolonged disruption.”
The event featured keynote speeches, as well as three panel discussions where top insurance executives, medical practitioners, bankers, economists, technology experts, academic specialists, risk analysts and investment advisers shed light on a range of topics including the group-wide supervision framework, the dual circulation strategy and climate actions.
Revealing a roadmap for the development of the Hong Kong Insurance industry, The Hon Christoper Hui Ching-yu, secretary for financial services and the treasury said: “I think there are two key drivers that motivated us to do this roadmap.
“Number one is a global trend, as you can see, COVID-19 made people see risk in a rather different light. A lot of things that we envisaged previously as ‘highly unlikely’, did happen, and we found that when they do happen, the risks can be enormous. In this context, it can present an enormous opportunity for insurance.”
“Number two, in terms of the broader context of the re-appreciation of risk, are black swans and grey rhino events, [illustrating] how people see risk in a different light, and how prepared they are to better manage risk for these kinds of events.”
He went on to say that previously, where Hong Kong and other businesses were concerned, there was a lot of emphasis on the notion of ‘just-in-time’, but “now we also have to look at ‘just in case’ when considering levels of risk. These global trends provide an enormous opportunity for the insurance sector both domestically and internationally,” Ching-yu added.
A global perspective
One of the keynote speakers at the event was Jonathan Dixon, secretary general of the International Association of Insurance Supervisors, who shared his remarks from a global supervisory perspective.
He said: “I appreciate the theme of today’s forum: ‘reflect, reset, revive for a resilient future’. In my remarks, I would like to reflect on the lessons we have learnt as the IAIS in recent years about the critical role that global cooperation and coordination amongst supervisors plays.”
Making particular reference to the “increasingly global challenges and opportunities” faced by the insurance industry, Dixon highlighted three areas where he specifically feels “a globally coordinated approach is critical” for a more resilient future.
He said: “Firstly, maintaining financial stability, second, responding to climate change, and third, embracing appropriate financial innovation. These are all areas where we need to reset and revive our approaches.”
Dixon went on to say that the need for effective approaches to building resilience are “more acute than ever” in the wake of the COVID-19 pandemic as the “global economic storm clouds have been darkening. While the IMF projections for Asia look somewhat more upbeat, insurers in the region can still expect to feel the effects of the distinct slowdown in growth rates predicted for advanced economies.”
In addition to this Dixon said: “While rising interest rates can provide some benefits to life insurers, this may be countered by claims inflation, increased cost of living pressures and market volatility.”
He went on to mention the additional challenges facing the industry such as the effects of climate change, the war in Ukraine and social issues such as an ageing society and digitalisation, describing them as a ‘formidable mix of risks” that could have longer term impacts on globalisation.
In regard to climate change, Dixon said that the effects will be felt on both sides of the insurers balance sheet and that: “The world is falling well short of the level of ambition needed to make an impact on global warming”, resulting in an increase of both physical and transition risks for the insurance sector, citing it as a “global challenge that demands a global response”.
Dixon also touched on the theme of technological innovation, saying that the “global focus is on building and sharing knowledge” amongst their diverse membership on both the benefits and also the risks of digitalisation.
Adding that the IAIS are looking to the Asian region in particular as a ‘cradle’ of technological innovation and also a source of ‘supervisory innovation’, Dixon said that the IAIS will shortly be publishing a summary on artificial intelligence and machine learning, distributed ledger technology and decentralised finance. In addition, he commented on application programming interfaces and open data, which could outline “some interesting results”.
“These innovations have shown some success in improving the customer experience, pricing and profitability of existing business, but have been less utilised by insurers to date to expand their underwriting footprint into new potentially higher risk market segments,” he said.
He went on to highlight some of the challenges in this area such as data security, cyber risks, money laundering, terrorist financing and legal and reputational risks. He said: “It will likely call for some deep questions about how supervisors may need to reset for the future, conversations we would be keen to engage with [delegates].”
Dixon closed by saying the key message remains the global nature of the risks and opportunities.
“The challenges are considerable, but given the commitment to cooperation and collaboration around the table, across all of our membership at the IAIS, I feel comfortable that we will be able to move forward confidently and cohesively on these issues.”
