Hong Kong asks insurers to return investing roles from Singapore
Over the past year, Hong Kong's insurance regulator has been steering some of the financial hub's biggest life insurers to move investment decision-making functions back to the city following their relocation to Singapore, according to sources familiar with the matter.
The push, led by the Hong Kong Insurance Authority (HKIA), started in early 2024 and is focusing on companies including AIA Group, the sources said, requesting not to be named because the matter is private. The HKIA is a regulator independent of the government, according to its website.
Drawn by incentives such as tax advantages offered by the Monetary Authority of Singapore (MAS), some insurers have in recent years accelerated efforts to establish the city-state as a regional asset management hub, despite making policy sales mainly in Hong Kong, the sources said.
While the move to Singapore was allowed by the HKIA, a number of emerging challenges prompted concern among regulators. Intensifying competition between the two financial hubs for talent and capital, as well as rising concentration risks among asset managers, triggered scrutiny over the relocations, the sources said.
The Hong Kong insurance regulator is able to track the decision-making process when insurers notify them about their outsourcing decisions. Based on a guideline known as GL14, the HKIA can look through detailed arrangements between the insurers and the investment managers who they entrust money with, including the amount and the location.
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In at least one case, the HKIA specifically looked at whether the Hong Kong investment team ultimately decides the mandates, according to one of the sources. The regulator has indicated it wants to create more jobs in the city, including from insurers, fund managers and law firms, the sources said.
The HKIA said that there is no statutory requirement for long-term insurers to maintain their assets in Hong Kong or to exercise their investment-decision making in the city. Nonetheless, all authorised insurers are expected to manage their assets prudently and avoid the building up of concentrated exposure. This will ensure insurers can swiftly settle claims and meet contractual obligations for the protection of policyholders, the regulator said.
The HKIA said that it will also pay due regard to potential legal and operational constraints on the fungibility of capital across different jurisdictions.
Singapore presence
In the case of AIA, it established an asset management company under a structure known as the variable capital company in Singapore in 2021. The insurer operates in 18 Asian markets with businesses ranging from life insurance to pensions.
AIA has since been moving assets in private equity and global stock strategies from Hong Kong to Singapore, according to the sources. Hong Kong's management arm is looking after mostly pension money raised from the city, the sources added.
With 198 employees, Singapore-based AIA Investment Management Private (AIAIM) managed US$139 billion as at the end of 2024. AIA Group's total invested assets stood at about US$255 billion in the same period.
AIA's Hong Kong-based senior group investment executives are in charge of setting up asset allocation principles and monitoring various managers, including AIAIM, but the fund selection decisions are in the hands of the Singapore investment team, the sources said.
General partners and asset managers mostly talk to the Singapore team for mandates, according to sources familiar.
AIA has said that it intends to keep its headquarters in Hong Kong. Its outgoing non-executive chairman Edmund Tse said in 2024 that the company had no intentions to relocate. AIA declined to comment.
The number of companies with regional headquarters in Hong Kong dropped from 1,457 in 2021 to 1,410 in 2024, according to government data.
One Hong Kong-based insurer was recently guided by people at the HKIA not to move assets into Singapore VCC structures, one source said.
Assets under management across the city's asset and wealth management industry rose 13 per cent to HK$35.1 trillion (S$5.8 trillion), according to a Securities and Futures Commission annual survey with some 40 insurance firms.
The MAS said in a response to Bloomberg News that Singapore's asset management industry has seen healthy growth from diversified sources outside the city-state, including North America, Europe and Asia. The VCC structure offers investment funds greater operational flexibility and saves costs, it added. BLOOMBERG
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