HK FEDERATION OF INSURERS WARNS OF FALLING RATES

Premiums in the non-life sector in Hong Kong are likely to fall during the second half, according to the Hong Kong Federation of Insurers. It noted that rates had grown by just 0.1% during the first six months of the year, but said that there were signs of increased price-cutting amongst non-life insurers, with employees’ compensation insurance looking likely to be one of the biggest money-losers. Chan Kin-Poor, chairman of the Hong Kong Federation of Insurers, noted that premiums for employees’ compensation policies had dropped in the first half of 2004 from between 3% and 4% of the value of contracts to as little as 1%. He said that insurers needed to charge at least 1.9% of the value of a contract just to break even. Although rates improved after the World Trade Center attacks of September 2001 and received another boost during last year’s Sars epidemic, rates began to soften dramatically six months ago in the light of an improved investment environment. Dao Heng general insurance manager Harry Wong said that the latest downturn made further consolidation likely, since the market was too small for the 100-plus insurers currently competing for business.