S&P's Revises Hong Kong's Insurance Industry to Stable

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Last updated at: (Beijing Time) Tuesday, June 11, 2002

S&P's Revises Hong Kong's Insurance Industry to Stable

Standard & Poor's (S&P's) Monday revised its outlook on the financial strength of the general insurance industry of the Hong Kong Special Administrative Region (SAR) to stable from negative.

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Standard & Poor's (S&P's) Monday revised its outlook on the financial strength of the general insurance industry of the Hong Kong Special Administrative Region (SAR) to stable from negative.

"This reflects our view that the industry has turned a corner and is seeking to establish a more positive operating environment after several years of very poor operating performance," said Connie Wong, associate director of financial services at Standard &Poor's.

The ratings agency added that its positive outlook on the SAR'slife insurance industry remained unchanged, largely because of theextremely positive impact of the introduction of the Mandatory Provident Fund (MPF), a government-initiated compulsory pension scheme applicable to almost all employed individuals in Hong Kong.

Thanks largely to the launch of the MPF scheme, the SAR's life insurance and pension sector achieved dramatic year-on-year growthof 41 percent in terms of total premiums from in-force business in2001, Wong noted.

Referring to the general insurance industry, Wong said that following almost a decade of irrational pricing and underwriting behavior in the general insurance sector, premium rates in the industry have steadily firmed over the past 18 months.

The improvement, however, is off a very low base and many challenges exist, including the achievement of real pricing adequacy in a fundamentally over-serviced and highly competitive market, Wong said.

On the whole, Standard & Poor's expects the ratings on nonlife insurers in Hong Kong to remain relatively stable given the improvement in market conditions.

Standard & Poor's holds that Hong Kong's life insurance industry is still relatively under-developed compared with other mature markets.

In the medium-to-long term, however, the Hong Kong life insurance industry is expected to continue to grow as its market becomes more sophisticated and demand for investment-linked products increases.

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