Best’s Commentary: Proposed Risk-based Capital Change In Hong Kong Could Bolster Market’s Global Standing

HONG KONG, March 25 (Bernama) -- Proposed changes in how the Hong Kong Insurance Authority (HKIA) evaluates non-life insurers’ required capital levels around natural catastrophes and man-made risks, as well as offshore reinsurance business, could bolster this geographic market’s position as a global reinsurance and risk management hub, according to a new AM Best report.

The proposed refinements are stipulated in a recently released HKIA consultation paper, following the adoption of the Hong Kong Risk-Based Capital regime on 1 July 2024. AM Best views the changes as credit positive for Hong Kong’s non-life market. Domestic insurers would stand to benefit from improved capital efficiency with the potential to grow offshore business outside of Hong Kong’s competitive local market. The HKIA proposes scaling back a number of prescribed natural catastrophe risk factors and allowing for greater diversification benefits among some markets in the Greater China region. Furthermore, eligible Hong Kong insurers or designated insurers that are members of a non-Hong Kong insurance group may apply to exclude offshore non-life reinsurance business from their prescribed capital calculations.