AIA Group could be affected by move; shares fall in HK on report
China's bank card organization UnionPay said Wednesday that some insurers may have violated payment rules when selling insurance products to consumers from the Chinese mainland, and it will ask them to correct their procedures.
The statement followed a Reuters report earlier in the day saying that the mainland authorities may impose restrictions on the use of mainland-issued UnionPay cards to pay premiums on Hong Kong-based insurance polices, in a move to slow capital outflows.
Insurance products in Hong Kong could enable buyers to get redemptions in dollars or Hong Kong dollars, which are preferred by investors as the yuan may weaken further this year.
Reuters reported that starting Thursday, each such transaction will be curbed at the equivalent of $5,000. It cited sources with direct knowledge of the situation.
Insurance policies are already in a restricted category that is subject to a $5,000 payment cap per transaction, UnionPay International said in an e-mail reply to the Global Times Wednesday.
But the reply noted that some insurers may have violated the rule and it will ask for corrections.
In respect of policies issued to mainland visitors in the first three quarters of 2015, new office premiums amounted to HK$21.1 billion ($2.7 billion), representing 21.7 percent of the total new office premiums for individual business in the first three quarters of 2015, according to data from the Hong Kong Office of the Commissioner of Insurance in November 2015.
Buying offshore insurance policies is regarded as "an effective way" for mainlanders to transfer yuan-denominated savings into dollar or Hong Kong dollar assets, Japanese financial company Nomura said in a research note sent to the Global Times Wednesday.
The State Administration of Foreign Exchange did not reply the Global Times' questions as of press time.
Nomura also said in the note that the growth of US insurer AIA Group, which has been "one of the largest beneficiaries of mainlanders buying offshore insurance in Hong Kong," would be dampened.
Following the news, shares of AIA on the Hong Kong bourse dropped 4.88 percent on Wednesday.
Liu Xuezhi, an analyst at Bank of Communications, told the Global Times Wednesday that China still faces capital outflow pressures in 2016, given that the yuan exchange rate may weaken further and the US may further raise interest rates.
But Liu noted that China is fully capable of dealing with potential risks, as its foreign exchange reserves, despite having declined to $3.33 trillion as of the end of 2015, are still the largest in the world.
