China watchdog issues HK insurance products warning

The China Insurance Regulatory Commission has warned investors that any insurance products sold in Hong Kong will not be protected by mainland Chinese laws.

In a move that some say may be seen as another attempt by the Chinese insurance watchdog to claw back cash flowing into products based outside of the Chinese mainland, investors in Hong Kong were warned that, due to less stringent regulations in the region, mainland Chinese law will not cover any potential issues arising from these policies.

The CIRC said in a statement on its website on Friday that life policies purchased in Hong Kong would not be protected by mainland law, and urged the Chinese public to be aware of the fact that Hong Kong has no regulations on dividend or cash value yet.

It also pointed out that China has much tighter regulation than Hong Kong – similar, it said, to the regulations in force in the UK and Australia – in these areas. As a result, any potential miss-selling claims on these products purchased in Hong Kong will not be covered by China.

The warning, as reported in the South China Morning Post yesterday, comes after mainlanders spent HK$31.6 bn, or 24.2 per cent of the total new premiums of all life policies sold in Hong Kong last year, up from just six per cent in 2009. Mainlanders come to Hong Kong to buy US and Hong Kong dollar priced policies to escape the exchange loss due to a weaker yuan.

As reported in February, the move is another effort to slow the flow of capital out of the country. In February China’s government moved to restrict the ability of mainland Chinese to buy insurance from non-Chinese insurance companies, causing shares in insurance companies active in the Hong Kong market to slump.

Hong Kong is in the process of ushering in a new soon-to-be-established Insurance Authority which is aiming be ready for full implementation in the second half of this year.

Hong Kong announced plans to replace the Office of the Commissioner of Insurance (OCI), a government body established to administer the Insurance Authority, the regulator for the insurance industry in Hong Kong, late in 2015. The new independent body will possess wider-ranging powers and a specific remit to regulate insurance intermediaries directly as well.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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