Hong Kong poised for greater role in shipping insurance to support China’s cargo fleet

Hong Kong can enhance its role as an international insurance centre for the shipping sector after China’s recent high-level planning meeting expressed support for the city developing more insurance and risk-management services, according to a veteran insurer and member of the city’s cabinet.

“The recently concluded third plenum has highlighted the mainland’s policy support and hope to enhance Hong Kong’s status as an international financial, shipping, and trading centre,” said veteran insurer Chan Kin-por, a lawmaker representing the insurance sector and a member of the Executive Council, Hong Kong’s cabinet.

“This goes hand in hand with another resolution arising in the third plenum to raise the underwriting capacity of maritime insurers to help them provide better global services,” Chan said.

“These shipping companies can use Hong Kong to fulfil their insurance needs,” Chan told the Post.

Hong Kong has more than 1,100 maritime and port companies, providing a diverse range of quality services, he said. Hong Kong has 2,500 registered seagoing vessels with a gross tonnage exceeding 100 tonnes, ranking fourth globally.

Mainland China has 8,300 such ships, making it the world’s largest fleet.

“If mainland shipping companies can establish captive ship insurance companies in Hong Kong, the significant premium amounts would attract foreign reinsurers to Hong Kong,” Chan said.

“Consequently, Hong Kong could speed up its role as an international risk-management centre, creating huge reinsurance and underwriting capacities and expertise, benefiting both mainland companies and Hong Kong. This situation represents a win-win scenario.”

Captive insurers tend to offer insurance only to entities within their own parent company’s group, which allows the group to keep profits that would otherwise go to an outside insurer. The arrangement also allows the group to better manage risk.

The gross premium of shipping insurance was HK$2.36 billion (US$303 million) in the first quarter of this year, representing 11 per cent of all general insurance business in the city. The figure was 1 per cent lower than a year earlier but 10 per cent higher than the same period in 2022, according to Insurance Authority data.

Besides developing shipping insurance, Chan said the third plenum also called for new systems and rules for maritime arbitration, an area where Hong Kong can assist.

“Hong Kong is the only common-law jurisdiction in China and the only bilingual common-law system with Chinese and English as the official languages,” he said.

“Hong Kong can play a crucial role in promoting maritime arbitration. With its abundant pool of maritime arbitration professionals together with its international recognition and enforcement of arbitration awards, Hong Kong can assist in advancing the mainland’s maritime arbitration system.”

In addition, Chan said Hong Kong is an ideal place for mainland shipping companies to set up Protection and Indemnity clubs. These clubs are non-profit mutual insurance associations that include shipowners, operators, charterers and seafarers as members. They are funded by the members and pay compensation for risks that are not covered by traditional insurers, which can include loss of life, property and environmental damage.

Hong Kong has nine such clubs currently.

The government has offered incentives to attract Protection and Indemnity clubs to operate here, such as waiving the premium levy . Chan suggested the government could look into offering incentives to encourage funding and bringing on-board insurance service providers.