The preferential treatment that reduces the cost of capital for Chinese insurers when they buy reinsurance in Hong Kong could change once the city adopts a new RBC regime.
The FSC exclusively told AsianInvestor that it intends to divide the capital structure of local insurers into two tiers. Analysts believe this will make them more prudent investors.
Hong Kong's incoming solvency rules for insurers will have a big impact on their fixed income portfolios just as they will on their higher-risk asset holdings, warn industry experts.
The draft guidelines form part of the new C-Ross solvency system, to which insurers in China must adapt over the next three years. They include reviewing asset-liability management.
Asset managers are offering newer structured products, which incorporate ideas from smart beta strategies, to raise yields.
While Southeast Asian nations have forged ahead with new risk-based capital rules, other countries, such as Hong Kong and Korea, are seen to be lagging.