Chinese residents are revenge-shopping for insurance policies in Hong Kong

For residents of mainland China, buying a Hong Kong insurance policy is a way of moving money overseas

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Mainland Chinese tourists walking in front of the Hong Kong skyline
Photo: Tyrone Siu (Reuters)

Long lines formed outside Hong Kong bank branches this week—although luckily for the world economy, they weren’t a sign of bank runs.

Instead, the queues were made up of visitors from mainland China waiting to open up new Hong Kong bank accounts to fund insurance policies purchased in the city. “[A]ll were there for the same purpose—to open new accounts amid growing economic uncertainty in mainland China,” the Hong Kong Free Press reported this week.


After three years of pandemic travel restrictions, Hong Kong’s borders are open once again. And mainland Chinese visitors are flying to the city on shopping sprees for insurance policies. Official data reflects this trend: New insurance premiums from mainland Chinese visitors in the first half of the year surged to 31.9 billion Hong Kong dollars ($4.1 billion), significantly above pre-pandemic levels in 2018 and 2019.


Why do mainland Chinese buy insurance policies in Hong Kong?

Buying insurance plans in Hong Kong—where, unlike in mainland China, the local currency can trade freely in international markets—has long been a workaround to Beijing’s capital controls.

By buying Hong Kong insurance policies, mainlanders can transfer capital overseas. That provides a measure of greater financial security—something particularly highly prized now, as China’s opaque economic engine is appearing to stall.

The instability stemming from China’s real estate crisis is likely another motivating factor to send capital overseas. The property slowdown risks spilling over to the broader financial industry. Last month, Zhongrong International Trust, one of China’s wealth management giants, missed payments on dozens of products. Investors protested outside its offices, although Chinese authorities are known to crack down on such displays before they build.


All the more incentive to get money out of China, then.

The chaos of mainland China’s covid management—pivoting from years of draconian lockdowns to a sudden let-it-rip reopening—is also driving demand for products that offer life and health protection, according to a report published in March by the consulting firm Oliver Wyman.


“Revenge shopping” for insurance?

The surge in sales of Hong Kong insurance policies could also be explained by a form of “revenge shopping.”


Since insurance companies operating in Hong Kong are prohibited from selling policies on the mainland, mainland Chinese residents must travel to the city to purchase policies there. With Hong Kong largely closed to visitors for the first three years of covid, the city’s insurance industry may now be seeing an explosion of pent-up demand from Chinese customers.

Hong Kong’s higher interest rates on products like life insurance and annuities are also attractive. Mainland customers in Hong Kong can also choose dollar-denominated policies; in contrast, policies purchased on the mainland are all yuan-denominated.


“With no surprises, the ties that bind Hong Kong insurers and mainland China customers will deepen,” notes Judy Chen, an S&P Global credit analyst. “Hong Kong’s geographic proximity provides an opportunity for its insurers to better serve the mainland’s under-penetrated market.”