Financial Institution in Hong Kong

Topic: Future Development Of

Insurance Industry In Hong Kong

(Entering the China’s Insurance Service Market Sharing)

Group 2039003 Zenki Yu039007 Jackie Li039011 Oliver Choi039013 Carmen Law039014 Sarah Fu

1. Abstraction the future development of the whole insurance industry in Hong Kong the future development of the particular insurance companies. Manulife Company as an example have a comprehensive understanding for the insurance industry.

2. Introduction of Insurance Industry The Conditions of Existing

Insurance Industry

Prevent Suffer Loss

Diversification of Risk

2. Introduction of Insurance Industry Transaction Cost (Asymmetric

Information) Adverse Selection Moral Hazard Specific Hold-ups

Takes place after the transaction Happens between clients and

insurance companies / agents or brokers and insurance companies

3. Composition of insurance industry in Hong Kong

A. The size of insurance business in Hong Kong 2002 HK$m 2003

HK$m2004HK$m

General Business-Gross Premium

23,448

24,766 23,478

Long Term Business-Office Premium

65,517

77,225 98,414

Total 88,965

101,991

121,892

3. Composition of insurance industry in Hong Kong

Premium

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004year

HK$m

illion

0

1

2

3

4

5

6

7

8

9

10

Per c

ent %

GeneralBusinessLong termBusiness% of GB and L-tB in GDP

3. Composition of insurance industry in Hong Konga. Insurer authorized in Hong Kong and

they distributed by types of insurance business and countries of incorporation

26%

11%

63%

general business insurerslong term business insurerscomposite insurers

3. Composition of insurance industry in Hong Kong

b. The major classes of insurance business and their respective market (For general business)

27%

24%19%

13%

17%general liabilityproperty damageaccident and healthmotor vehicleother

3. Composition of insurance industry in Hong Kongb. The major classes of insurance

business and their respective market (For long-term business)

84%

13% 3%indibidual life business

retirement schememanagementother

3. Composition of insurance industry in Hong Kong

individual life policies

0

1000000

2000000

3000000

4000000

5000000

6000000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004year

no.of

indiv

idual

0

10

20

30

40

50

60

70

80

90

100

percen

t %

Individual life policies

% of individual life policies inHK population

3. Composition of insurance industry in Hong KongB. Manulife’s Financial Highlightsa. Total Assets Under Management:

0102030405060708090

HK$ billions

2000 2001 2002 2003 2004year

Total Assets Under Management

TotalAssetsUnderManagement

3. Composition of insurance industry in Hong Kongb. Total Premiums and Deposits

02468

101214

HK$ billions

2000 2001 2002 2003 2004year

Total Premiums and Deposits

Total Premiumsand Deposits

3. Composition of insurance industry in Hong Kongc. Benefits Paid

00.5

11.5

22.5

33.5

4

HK$ billions

2000 2001 2002 2003 2004year

Benefits Paid

Benefits Paid

3. Composition of insurance industry in Hong Kongd. Policy Dividends Paid

0100200300400500600700800

HK$ billion

2000 2001 2002 2003 2004year

Policy Dibidends Paid

Policy Dibidends Paid

3. Composition of insurance industry in Hong Konge. Number of Individual Policies in Force

0100200300400500600700800900

1000

No.

2000 2001 2002 2003 2004year

Number of Individual Policies in Force

Number ofIndividualPolicies inForce

3. Composition of insurance industry in Hong Kongf. Number of Agents

01,0002,0003,0004,0005,0006,0007,000

no. of agents

2000 2001 2002 2003 2004year

Number of Agents

Number of Agents

4. Regulations of insurance industry

Financial Examination Onsite Inspection Market's Consolidation Actions of Insurance Authority (IA)

include: limitation of premium income, restrictions on investments, requirement for a special actuarial investigation

Self-Regulatory Initiatives

5. Operations of insurance organization A. Data Collection and Statistical Estimation measure the optimal premium and compensation the Central Limit Theorem set how much is the premium opportunity cost for the policyholder

5. Operations of insurance organizationB. Contractual Consideration asymmetric information as well as unexpected risks fulfill the right and duty risk being transferred, diversified or alleviated

6. Case Study of ManulifeA. Introduction of Manulife Company Manulife Life Insurance (Hong Kong) Limited "AA+ (Very Strong) by Standard & Poor's www.manulife.com.hk bancassurance alliance with CITIC Ka Wah Bank "Guaranteed Retirement Income Plan"

6. Case Study of ManulifeB. Products of Manulife individual insurance, group life & health, wealth management, MPF & Occupational Retirement Schemes Ordinance (ORSO), general insurance, credit cards Personal Life and Health Insurance

6. Case Study of ManulifeB. Products of Manulife life insurance is dividend into Whole Life, Term, and Endowment In the policy, there are many information, premium paying period, basic plan premium, interest, etc.

7.Future developmentA. Hong Kong insurance industry Statistics also indicated strong signs

of recovery in the long term business market and general business market

According to latest figures: 178 authorized insurers 112 general business insurers 46 long term business insurers

7.Future developmentA. Hong Kong insurance industry Hong Kong's insurance market has

a strong international presence. Over half of the authorized

insurers are incorporated outside Hong Kong in 25 different countries. (US companies taking the lead)

7.Future developmentA. Hong Kong insurance industry China's accession to the World

Trade Organization opens up more opportunities for Hong Kong insurers.

China's total premium income grew to US$25 billion for 2001, an increase of 32 percent over 2000.

7.Future developmentA. Hong Kong insurance industry After joining the WTO, China is

committed to further widening market access to foreign players, which enables Hong Kong a bigger role to play.

Hong Kong is well poised to develop into an important insurance center

7.Future developmentB. ManulifeFuture development of Manulife Whisked off five industry awards this year. Came top of its class in a newly introduced MPF Fund category.

7.Future developmentB. ManulifeDeveloping the china market Continued to expand its operations in China and Hong Kong with the start of operation in cities of Nanjing, Hangzhou and Zhongshan. Official Life Insurance Partner of the 2008 Olympic Games in Beijing

7.Future developmentB. ManulifeDeveloping a Retirement Plan Services in Hong Kong By the year 2016, more than one-third of Hong Kong’s population will be over fifty years old. retirement planning should be more important helping retiree to make a well management on saving

7.Future developmentB. ManulifeDevelopment on their market share Manulife expects that there will have a well development on market price of their shares. market price reflect the value of its business and its future business prospects represent an attractive investment

8. Conclusion A. Hong Kong insurance industry Helping people to prevent suffer

loss and diversify their risk Facing the problems of adverse

selection, moral hazard and specific hold-ups

Reducing the risks by data collection, statistical estimation and contractual consideration

8. Conclusion Five major classes of business Three kinds of long term business Self-Regulatory Initiatives Spreading its services in China with

benefiting China joined the World Trade Organization

Developing into an important insurance center

8. ConclusionB. Manulife Operating its business in China like Nanjing, Hangzhou, Zhongshan and so on Increasing the business of Retirement Plan Services because of serious aging problem in Hong Kong

Financial Institution in Hong Kong

Goal Insurance Service Center