A much-anticipated plan to launch more cross-border trading of insurance products has been put on hold because of the Hong Kong protests, it seems. In an announcement that makes no apparent commercial sense, Hong Kong Insurance Authority chairman, Moses Cheng Mo-chi, said yesterday that economic conditions were not favorable and discussions between Hong Kong industry representatives and their mainland counterparts had been put on hold. As quoted by SCMP:
“The talks about setting up an insurance connect scheme will definitely be delayed as a result of the challenges of international business operating environment as a result of the ongoing US-China trade war. It would be hard to launch a new connect scheme under the current economic situation.”
As the SCMP article explains: Under the proposal, which was never given a launch date, Hong Kong insurers would set up service centres in the Greater Bay Area, allowing mainland customers to settle renewal premiums and file claims for insurance products they already own. The next stage would expand the service into a full-scale insurance connect scheme to allow mainlanders to buy policies from Hong Kong companies – without having to leave the mainland – while Hong Kongers could also buy products from mainland insurers.
What exactly the prevalence of good economic conditions has to do with policymaking is, however, yet to be explained. One might be able to understand the reluctance of Hong Kong-based insurers – most of which are either branches of Chinese giants or multinationals – to invest in setting up new branches, perhaps, in Guangdong, during the current economic slowdown. Why that should stop discussions necessary to make such investments possible once conditions improve, however, is another matter.
Is this some kind of punishment for Hong Kong due to the protests? If so, it’s not a good sign for future developments under the GBA plan going forward. If, however, this is simply concern about rising risk levels for capital flight, well, that is a different story. Either way, it would be good for the investment community to have a clearer idea what is going on.