Italian insurer Generali’s launch of a new life company in Hong Kong is driven by a desire to diversify beyond investment-linked product business in light of more stringent rules, say local distributors.

However, the firm still has a licence to develop investment-linked assurance schemes (Ilas) and intends to do so under the new unit, said a spokeswoman for Generali. 

The insurance group has positioned the new unit, Generali Life Hong Kong, as a business combining its various products under a single brand for high-net-worth and mass-affluent investors. Previously they were sold by various arms of the business.

Generali stopped selling Ilas products in Hong Kong last year after new rules came in, and its sales team supporting IFAs on Ilas distribution left, said a Hong Kong-based independent financial adviser (IFA), whose firm used to sell a Generali Ilas product. 

The regulations, known as GN15, took effect on January 1 last year, forcing insurers to stop selling old Ilas products to new customers and develop GN15-compliant ones.

Generali had offered one Ilas product before the rules came in, but it is no longer available to new clients, confirmed the spokeswoman. She declined to comment on staff departures. 

The rules set out new standards for insurers underwriting Ilas products, as reported. They include new requirements for disclosing the calculation of remuneration paid to Ilas distributors. One key change was the banning of upfront payment of commissions.

As a result, sales of Ilas products in Hong Kong shrank. Citing government data, an IFA said the annual premium equivalent of Ilas in 2015 fell to HK$2.26 billion ($291 million) last year from HK$6.37 billion in 2014.

Generali Life Hong Kong will now sell life insurance and unit-linked products to individuals, including retail, mass-affluent and high-net-worth clients. Another entity, Assicurazioni Generali’s Hong Kong branch, will provide general insurance to retail and corporate customers, as well as group life insurance and employee benefits.

Because of GN15, insurers have opted to expand their product range beyond Ilas. “I believe this is the right strategy as insurers cannot just rely on selling Ilas to Hong Kong clients,” said Susana Lau, director for individual insurance and partnership business at Convoy Financial Services, a Hong Kong-based IFA firm.

She added that Generali’s move to set up a Hong Kong office to distribute life and other protected products was the latest example of how insurers have been adapting to the new environment.

Other insurance firms have taken similar steps. For example, UK-based Aviva does not now sell Ilas products in Hong Kong.

Lau said the Ilas market had become more stable as a result. “But we now face another problem, which is the volatile investment market prompting Hong Kong investors to seek more guaranteed products, such as traditional endowment plans,” she noted.

Yet while market volatility is a concern, it creates an opportunity for those willing to take risk, added Lau. “Dollar cost averaging with a regular investment pattern can help reduce the potential risks.”