The study shows that total insurance premiums in Hong Kong grew by 6.3 per cent in 2019, but Covid-19 will most likely see that growth slow down massively, with the study projecting a growth rate of 1.46 per cent for 2020. The life insurance segment, which makes up over 90 per cent of the Hong Kong market, is expected to grow by 1.51 per cent in 2020 - against the pre-Covid forecast of 6.7 per cent. Meanwhile, non-life insurance is estimated to grow by one per cent in 2020 versus the pre-Covid forecast of 4.4 per cent.

Swarup Kumar Sahoo, Insurance Analyst at GlobalData, said: “The insurance business is expected to be adversely affected by the prevailing social unrest in the country, as a significant part of the demand is based out of mainland China.”

Insurers also face the risk of lower returns on their investments, especially those held in corporate bonds, due to the economic downturn. The Hong Kong Monetary Authority’s benchmark interest rates went down from 1.65 per cent at the end of March to 0.5 per cent at the first week of June, indicating pressure on returns.

In order to adapt to the more challenging business climate, insurers are beefing up their digital capabilities. GlobalData cited Manulife Hong Kong’s recent formation of a virtual sales platform to allow customers to connect with agents online for product queries and transactions. The Hong Kong Insurance Authority is also issuing new licenses for digital-only life insurance companies, it said.

“The over-dependence on life insurance business makes it difficult for insurers as they will have to grapple with lower sales, uncertain returns, and rising claims,” Sahoo said. “The resurgence in Covid-19 infection rates and possible re-imposition of lockdown restrictions could further derail the recovery prospect of insurance businesses.”