Hong Kong: Life insurance set for growth in 2024 following years of decline

| 22 Jan 2024

A new report indicates a positive trajectory for the life insurance sector in Hong Kong following a period of decline attributed to the COVID-19 pandemic and subsequent economic downturn.

The sector is expected to experience a compound annual growth rate (CAGR) of 4.1% from 2024 to 2028, with direct written premiums (DWP) increasing from HKD459.9 billion (US$58.7 billion) in 2024 to HKD539.1 billion (US$68.8 billion) in 2028. 

According to figures from GlobalData, the Hong Kong life insurance market is poised for recovery, beginning in 2024. The rebound is largely attributed to the easing of pandemic-related restrictions and a gradual resurgence in economic activity.

The Hong Kong economy has endured substantial difficulties since 2021, primarily due to extended pandemic restrictions, rising interest rates, and a global economic slowdown affecting consumer spending. However, the economy's recovery, initiated in 2023, is expected to bolster the life insurance sector in 2024.

The integration of Hong Kong with Mainland China, especially within the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), is anticipated to further stimulate growth in Hong Kong’s life insurance business. The reopening of Hong Kong's borders to international visitors in December 2022, after three years of travel restrictions, has already shown positive effects. 

The Insurance Authority (IA) reported a significant increase in business from Chinese customers in 2023, a trend expected to continue into 2024.  Mainland Chinese residents form a key customer base for Hong Kong's life insurers, drawn by higher returns on life insurance products in Hong Kong compared to those in China. The IA observed a 21.3% increase in new business from mainland Chinese customers in the first half of 2023, rising to HKD31.9 billion (US$4.1 billion) from HKD26.3 billion (US$3.4 billion) in 2019.

Whole life insurance remains the dominant product in the market, projected to represent 69.8% of life insurance DWP in 2023. This demand is driven by demographic shifts such as an aging population, increased life expectancy, and lower fertility rates. GlobalData's Macroeconomic Database predicts that the population aged over 65 years in Hong Kong will rise from 15.3% in 2015 to 22.0% in 2025.

The demand for whole-life insurance policies is also growing as insurers enhance these plans with added protection and inclusivity features, such as coverage for senior citizens, additional death and dementia-related benefits, and environmentally and socially responsible investment-focused options. Whole life insurance is forecast to grow at a CAGR of 4.2% during 2024-28. 

Endowment insurance, the second largest life insurance product, is expected to account for 9.1% of the DWP in 2023. With high interest rates prevailing, insurers are focusing on expanding their mix of linked insurance products, including protection-linked plans and investment-linked assurance schemes. Endowment insurance is projected to grow at a CAGR of 3.6% from 2024 to 2028. 

General annuity, ranking third, is estimated to represent 7.3% of the life insurance DWP in 2023. Its growth, forecast at a CAGR of 3.1% over the same period, is propelled by an aging population and a shrinking working-age demographic. Hong Kong's working-age population is expected to decrease from 73.4% in 2015 to 67.8% in 2025, as per GlobalData’s Macroeconomic Database. 

Term life, pension, and other life insurance products collectively are estimated to hold a 13.8% share of life insurance DWP in 2023, reported Insurance Business.