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China tightens restrictions on insurance purchases in Hong Kong
[HONG KONG] China is tightening restrictions on the use of third-party payment providers to buy insurance products in Hong Kong as authorities move to stem outflows of the yuan.
Starting March 12, the People's Bank of China will prohibit the use of electronic payment services by mainland individuals for any life insurance and investment-related products, according to notices sent by insurers to their agents that were seen by Bloomberg. Individuals can still use those payment systems for insurance on personal accidents, medical and transportation, with a transaction and policy cap of 30,000 yuan (S$6,317), the notices showed.
One notice issued by BOC Group Life Assurance Co said the company was suspending any payments made by China UnionPay Co cards through online payment provider All In Pay Network Services Co.
Calls and e-mails to BOC Group, All In Pay and Hong Kong's insurance commissioner seeking comment outside of business hours weren't immediately returned. The PBOC didn't immediately respond to faxed questions Saturday outside office hours.
The latest move comes on top of transaction limits placed on the use of UnionPay cards last month as China stepped up administrative measures to slow capital outflows that Bloomberg Intelligence estimates reached US$1 trillion last year. The tightening marked a reversal after years of easing that spurred global use of the yuan, a trend that turned on China when speculative bets against the currency offshore jumped.
Chinese people have been flocking to Hong Kong to buy insurance policies, which typically come with better service than on the mainland and also offer them a way to skirt controls on how much capital they can move abroad. Purchases of insurance policies by mainland visitors in Hong Kong reached HK$21.1 billion (S$3.71 billion) last year through September, following a 64 per cent surge in 2014, according to the city's industry regulator.
China's State Administration of Foreign Exchange capped the purchases of insurance products overseas using UnionPay cards at US$5,000 per transaction, people familiar with the matter told Bloomberg last month. Purchases through UnionPay cards had been exempt from capital controls that limit Chinese individuals to bringing out a maximum of US$50,000 per year.