Proposed changes in how the Hong Kong Insurance Authority (HKIA) evaluates non-life insurers’ required capital levels around natural catastrophes and man-made risks, as well as offshore reinsurance business, could bolster this geographic market’s position as a global reinsurance and risk management hub, according to a new AM Best report.

The proposed refinements are stipulated in a recently released HKIA consultation paper, following the adoption of the Hong Kong Risk-Based Capital regime on 1 July 2024. AM Best views the changes as credit positive for Hong Kong’s non-life market. Domestic insurers would stand to benefit from improved capital efficiency with the potential to grow offshore business outside of Hong Kong’s competitive local market. The HKIA proposes scaling back a number of prescribed natural catastrophe risk factors and allowing for greater diversification benefits among some markets in the Greater China region. Furthermore, eligible Hong Kong insurers or designated insurers that are members of a non-Hong Kong insurance group may apply to exclude offshore non-life reinsurance business from their prescribed capital calculations.

“By better aligning capital standards with local market characteristics and maintaining international prudential benchmarks, the HKIA is trying to balance the non-life segment’s sustainable development with policyholder protection,” said James Chan, director, AM Best.

According to the Best’s Commentary, Hong Kong’s direct non-life market remains highly fragmented and competitive, comprising 86 pure non-life insurers as of September 2025. Over the past five years, the segment has experienced subdued growth in the low-to-mid single digits, constrained by economic headwinds and the broader slowdown in mainland China.

“As a result, we view the proposed solvency framework adjustments as a catalyst for insurers, especially for domestic direct insurers who are equipped with strong capitalisation, robust underwriting know-how, or favourable parental support, to pursue growth opportunities outside the local market,” said Christie Lee, senior director, AM Best.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=363466.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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