Over the past 100 years, Hong Kong's insurance industry has grown and matured in tandem with Hong Kong's transformation from an economy driven by manufacturing, to one that is now 90% driven by services.

Hong Kong is now a leading trade and services hub for a worldwide web of commercial activities. We have also become a major insurance and reinsurance hub, and the global financial platform for investing in the Mainland.

At the moment, we have about 180 insuring firms operating in Hong Kong. This is the highest concentration in Asia. They include direct insurers, professional reinsurers, and specialist insurers engaging in captive, mortgage, credit, marine and other businesses.

More than half of the authorised insurers in Hong Kong are from overseas. That makes Hong Kong the most open and internationalised insurance market in Asia. Twelve of the world's top 20 insurers do business in Hong Kong, along with 11 of the world's top 25 reinsurers.

Total gross premiums grew by 20% to $123 billion, or US$16 billion last year. And, for the first time, insurance premiums last year reached the $100 billion mark.

The insurance sector accounts for about 9% of our GDP, which underscores its importance to our economic makeup. Internationally, insurance penetration in Hong Kong is among the highest in the world, sharing the same ranking as the United States.

What is more significant is that Hong Kong's insurance industry has maintained double-digit growth throughout the past decade, even when we were hit by the Asian financial crisis in 1997 and 1998.

This strong growth highlights not just the underlying strength and potential of the Hong Kong insurance market, but also the world-class regulatory system which buttresses that development.

Hong Kong maintains its own insurance market and insurance regulatory system. We are a separate and founding member of the International Association of Insurance Supervisors. 

Hong Kong is committed to the highest standards and best international practice in insurance regulation. Our regulator, the Office of the Commissioner of Insurance, is tasked by law to maintain 'the general stability of the insurance market and protect the interests of policyholders and prospective policyholders'.

And, as we have always done elsewhere in our economy, we adhere strictly to the policy of maintaining a free market for insurance in Hong Kong. The guiding principles of our insurance regulation are openness, consistency, and transparency.

Openness has always been the greatest strength of our insurance industry. It has enabled the industry to adjust quickly to new developments. Our standards on solvency, corporate governance, market transparency and all other regulatory issues are on par with the highest international benchmarks.

Hong Kong is also home to more than 3,600 international companies with regional headquarters or offices. Among them are many of the world's major international insurers and reinsurers. They are drawn here by a number of factors that make Hong Kong the ideal base from which to manage their Asian operations.

Four distinct strengths

I would like to highlight four distinctive strengths:

First, Hong Kong is the world's freest economy. The Heritage Foundation of the United States has ranked Hong Kong the world's freest economy for the past 11 consecutive years. The Government sees its role as that of a facilitator, providing effective and efficient infrastructure, which is vital for business development.

Second, Hong Kong is a world-class business centre. We are home to a large concentration of international banks, accounting and legal firms. Hong Kong is also one of the most prominent asset-management, debt-financing and capital-formation centres in Asia. First-class insurance services, including captive management and reinsurance expertise, are readily available here.

Third, Hong Kong has superb hard and soft infrastructure. We cherish the free flow of news and information, and have a clean and efficient civil service. We have a level playing field for business, and some of the best transport and communications infrastructure in the world.

Fourth, Hong Kong is strategically located. Hong Kong fits neatly between the time zones of Europe and America. Setting up an insurance business here will provide the best strategic platform to tap the potential of the expanding Asian market, particularly the Chinese Mainland market.

Mainland insurance service set for fast growth

China's total premium income grew to RMB 432 billion (US$52 billion) in 2004, 11% higher than a year before. Assets held by the Mainland's insurance industry now stand at US$145 billion. However, even with such impressive growth, China's insurance penetration rate, at 3.3% of GDP, remains low by international standards.

Increasing affluence, a growing public awareness of insurance, and greater attention to risk management by Mainland corporations means that the demand for insurance service on the Mainland is set to grow at a very fast rate. Naturally, this will offer new opportunities for the international insurance industry.

I believe the best place to explore and develop those opportunities is Hong Kong. We have the decades of experience, the insight, the contacts, as well as the language and cultural links that can smooth the way for you.

And since January last year we have had another tool in our briefcase to boost Hong Kong's role as the best place in Asia to do business. We call it CEPA for short, which stands for Closer Economic Partnership Arrangement.

CEPA offers new opportunities

CEPA is a free-trade pact between Hong Kong and the Mainland. It provides enhanced market access to China's massive market ahead of its WTO commitments.

CEPA now covers 26 service sectors, including insurance, banking, securities, legal and accounting services.

On the insurance side, it allows insurers authorised and incorporated in Hong Kong to form strategic alliances and to pool their assets and business experience to meet the Mainland's market-entry requirements. CEPA provides a platform for continuous access by the Hong Kong insurance industry, which is not provided in any other places on earth.

Apart from more multi-national corporations setting up in Hong Kong, we also expect capital and insurance funds to flow into our financial markets to leverage on the impressive growth of China's economy.

Int'l market formation centre

As China's economy develops, Hong Kong has become the premier international market-formation centre for Mainland enterprises. The inflow of capital from Mainland insurance companies and the National Social Security Fund into international financial markets, as recently allowed by the Mainland authorities, will undoubtedly further enhance the strength and role of our financial markets.

Insurance is vital to protecting the safety and security of a modern society. It provides peace of mind for families and enables companies to manage and control risks.

Hong Kong has a vibrant and successful insurance industry that is poised to grow. Our strategic location, world-class infrastructure, excellent financial and supporting services, free flow of information, a large pool of insurance professionals, wealth of experience in the Mainland market, and our cultural and language ties, makes Hong Kong the very best location from which international insurers/reinsurers to tap into the Mainland insurance market, as well as invest in either the Mainland's market or Mainland enterprises.

By serving as the best gateway for international insurers wishing to access the Mainland market, we are not only creating more opportunities for the Hong Kong insurance industry but also contributing to the further economic development of the Mainland.