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Domestic Shipping
Maritime insurance industry needs a boost
Date:2018-01-02 Readers:

In her first Policy Address Chief Executive Carrie Lam Cheng Yuet-ngor did not deal with development of the maritime industry at great length. However, she set out the blueprint for the industry's future development by singling out high value-added maritime services. Those include marine insurance, legal and arbitration services, as well as shipping finance, management and registration.

In particular, marine insurance - protection of international shipping operations - provides essential support to risk allocation in the maritime industry. Its market size and service level is always an important factor in evaluating the competitiveness of a maritime hub. For instance, London, one of the world's top maritime centers, manages more than 30 percent of all types of marine insurance in the world.

Thus, I believe the special administrative region government's vision to facilitate marine insurance industry development is a right step to take.

As a leading international maritime hub Hong Kong certainly has a strong foundation in the sector. Since Hong Kong's return to China on July 1, 1997, gross registered tonnage (GRT) in the Hong Kong Ship Register has continually increased. There were more than 2,500 registered vessels with 112 million GRT as of September.

In terms of deadweight tonnage, almost 10 percent of vessels in the world are owned or managed by Hong Kong shipowners or operators. In terms of third-party liability insurance, among the 13 protection and indemnity (P&I) insurance clubs under the International Group of P&I Clubs, 12 have set up subsidiaries or offices in Hong Kong. Moreover, China Shipowners Mutual Assurance Association which represents many shipping enterprises on the Chinese mainland has also set up its subsidiary in the city. The total insurance amount contracted in respect of vessels and marine cargos exceeded HK$2.7 billion last year.

However, it is necessary to realize that amount accounts for only 1 percent of marine insurance contracted globally. Accordingly, either relative to the size of the fleet owned by Hong Kong or its position as an international maritime center, the marine insurance market is disproportionally small. This unfavorable reality calls for urgent government efforts.

It is widely believed the ambitious Belt and Road Initiative spearheaded by the nation could become a new engine for Hong Kong's economic development. As the global initiative is taken forward, trade in goods and infrastructure construction in over 60 countries or regions can be more extensively developed. Demand for transport of massive goods and construction cargoes will definitely bring vast business opportunities to marine insurance companies. From the perspective of Hong Kong, if the government can ink more bi-party or multi-party free trade agreements with the aforementioned countries and regions, it would certainly facilitate stronger cooperation between Hong Kong and those places.

Currently, offshore reinsurance and self-insurance companies are required to pay just half the 16.5 percent standard profits tax rate for the first HK$2 million of profits, thanks to newly announced measures to provide tax relief to small and medium-sized enterprises. However, it is not sufficiently attractive to operators in the marine insurance industry relative to tax incentives offered by competitors in the region. For example, in Singapore, a 10 percent special profits tax rate is applied to hull, machinery insurance and P&I insurance.

Thus it is necessary for the Hong Kong government to conduct relevant studies and introduce further tax incentives to attract more marine insurers, reinsurers, P&I clubs and insurance agents to set up or expand operations in Hong Kong.

Moreover, an industry's sustainable development is founded on a stable supply of talent. It is particularly true for a highly specialized industry such as marine insurance. However, currently local universities offer no training courses on marine insurance.

Hence, the government needs to work with maritime industry players such as the Hong Kong Shipowners Association and Hong Kong Federation of Insurers to seek cooperation opportunities with local educational institutions and mainland maritime schools to provide related courses.

The government should also implement a long-term plan to promote the maritime industry among local young people and attract maritime insurance talents from all over the country and overseas to work in Hong Kong.

source:http://www.chinadaily.com.cn/hkedition/2018-01/02/content_35420801.htm

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