Munich Re, one of the world’s biggest reinsurance firms, is scaling back its Hong Kong office and expanding its Beijing operation, within a major regional restructure.
The revamp will also see Hong Kong losing out to long-term rival Singapore as the reinsurer plans to expand its office in the city state to play a bigger role in managing its Southeast Asia business.
The company will increase its staff in Singapore, where it already employs 200 people. Until now the Hong Kong and Singapore sites have shared regional responsibility.
The plan also includes an expansion in Tokyo and its offices in Shanghai and Kuala Lumpur closed altogether. The reorganisation will be completed by the end of next year.
Munich Re, which is 2.5 per cent owned by US billionaire investor Warren Buffett, explained in a statement it was “making changes to its strategic set-up in the region…to focus more closely on local markets, while creating a more flexible structure”.
“In future, Chinese clients will primarily be managed out of Beijing, while the Hong Kong presence will be greatly reduced and the Shanghai property-casualty office closed. The Taipei Liaison Office will remain,” it added.
The company said Asia will have double-digit growth in the following year, particularly China.
“According to the latest figures, in 2015 China pushed the United Kingdom from third place (behind the USA and Japan) in the ranking of the largest primary insurance markets.
“China is expected to become the world’s second-largest insurance market behind the USA by 2017,” the statement said.
A spokesman for the company in Hong Kong, where the firm is believed to employ around 50 staff, told South China Morning Post that it will maintain an office in the city.
“Munich Re is making a clear commitment to the greater China market by building up critical size and the full range of front-office services in Beijing,” she said.
“We will maintain a non-life presence in Hong Kong to service our local clients. This process will take some time and we have no figures at this stage on affected colleagues, many of whom will be offered positions in Beijing or Singapore. Our life operations and asset management in Hong Kong are not affected by the organisational change.”
Ludger Arnoldussen, a member of the Munich Re board of management with responsibility for Asia Pacific region, added the changes will “streamline our structures to be better placed to respond quickly and effectively to the challenges of these highly competitive markets”.
An industry source close to the Munich Re operations here said the change came as no great surprise as its Beijing business volume is much bigger than in Hong Kong.
According to the company’s latest annual report, the Germany company’s mainland China reinsurance premiums stood at 1.4 billion euro (HK$12.17 billion) last year, representing about 5 per cent of its global reinsurance business, which is the second largest market in Asia Pacific for Munich Re, after Australia. That was 17 per cent rise from 1.2 billion euros collected in the mainland in 2014.
In comparison, Munich Re in Hong Kong was the fourth largest reinsurance player with reinsurance premium income of HK$294 million in 2014, according to latest data available from the Office of Commissioner of Insurance of Hong Kong.
“Before China opened up its reinsurance business, many companies like Munich Re conducted business in mainland China from Hong Kong,” the source said.
“Now, much of its business is conducted directly in the mainland and the gap in business volume between the two has widened, leading the company to make what looks like a natural choice.”
Chan Kin-por, a lawmaker for Hong Kong’s insurance sector who is also an advisor at Munich Re, said the restructuring shows the Hong Kong government needs to do more to keep international reinsurers in the city.
“The government needs to cut compliances costs and make it easier for companies to operate in both Hong Kong and the mainland.
“Hong Kong still has a lot of advantages for international insurance companies to operate, but the business volume here will never be able to match the mainland,” Chan said.
Chan said Hong Kong still remains an attractive market for life insurance companies as many mainlanders like to buy their products here, as more investment choices exist, meaning it is unlikely other companies might be tempted to move to Beijing instead.
HONG KONG — I returned to my native Hong Kong in 1998 after more than two decades of working as a reporter in New York City. I was hired to start a journalism program at the University of Hong Kong, my alma mater, and train a new generation of reporters to tell the stories of Hong Kong,China and Asia. It was a big and timely beat.
Hong Kong was handed over to China after 156 years of British rule 10 months before I returned. In an ingenious stroke designed to reassure the international community and Hong Kong people, China’s paramount leader, Deng Xiaoping, devised the “one country, two systems” arrangement: Beijing would assume sovereignty, but Hong Kong would keep its rule of law and capitalist ways for 50 years.
The political rules were written to ensure that pro-Beijing forces would control the local legislature, known as LegCo, and Hong Kongers were willing to accept an imperfect system in the hope that a more accountable government would evolve. Many were heartened in 1998 when, in the first post-handover LegCo election, the Democratic Party won 13 of the 50 seats and became the dominant opposition.
As I caught up with friends from my college days, I shared their excitement about the city’s future. Many veteran activists cherished the idea that cosmopolitan Hong Kong, where people enjoyed freedom of expression, could inspire democratic change in mainland China.
Fast forward to 2016. Another LegCo election took place earlier this month, four days after I retired as director of the Journalism and Media Studies Center at the University of Hong Kong. In a rebuke of Beijing, voters elected six candidates who ran on platforms calling for self-determination. The new legislators, all under age 40, see “one country, two systems” as a sham. They are taunting Beijing, which regards such talk as treasonous.
The election results portend greater political stasis and polarization in Hong Kong. The calls for independence, as unlikely and impractical as that is, reflect growing resentment for how Beijing and its local representatives have governed the city and intervened in its affairs. Discontent is especially high among the youth.
People are also angry about skyrocketing rents, a sharp disparity between rich and poor, and naked cronyism. Hong Kong’s inequality rating is among the worst in the world. In 2014, The Economist put the city at the top of aglobal index of cronyism.
The repression on the mainland, particularly since President Xi Jinping came to power in 2012, is another source of worry for Hong Kongers. Lawyers, journalists, activists and other dissidents have been arrested and paraded on state television to confess their “crimes.” And the long arm of Beijing seems to have extended to Hong Kong: Local booksellers were kidnapped and interrogated on the mainland about publications that Beijing found offensive. Beijing is also gaining more control over city institutions like the news media.
To many Hong Kongers, the result of the Umbrella Movement two years ago was the last straw. For 79 days, thousands of people camped out in the streets asking for broader representation and genuine universal suffrage. They received no concessions from Beijing.
But the LegCo insurgents and their supporters in the general public are increasingly fighting a lonely battle as powerful forces around the world are scrambling to appease Beijing. In recent decades, the fortunes of the mainland and Hong Kong have turned.
China, once Hong Kong’s poor cousin, has become the world’s second largest economy. Multinationals bend over backward to please Beijing and gain access to the world’s largest consumer market. When China’s top internet regulator visited Mark Zuckerberg in Silicon Valley, the Facebook chief made sure to display on his desk a book of President Xi Jinping’s collected speeches. Bloomberg self-censored an exposé of one of China’s richest men in order to protect its data terminal business in China. Harvard University later set up a research center in Shanghai with major funding from the same tycoon.
China has become an indispensable player in world politics, and sometimes throws its weight around, as in the South China Sea. It is also building an alternative world order: The Shanghai Cooperation Organization, the Asian Infrastructure Investment Bank and the One Belt, One Road plan to network more than 60 countries spanning vast stretches of Asia, the Middle East and Europe are China-led efforts to offer balance to the United States.
Meanwhile, Hong Kong has lost some of its luster. Once the gateway to China, it now contends with Shanghai as the mainland’s top financial center. Its container port is losing ground to Shenzhen. Its economy is more dependent on the mainland.
Although it’s the young rebels who caught international attention in recent years, many Hong Kongers believe the city needs to seek accommodation with Beijing. These include people who appreciate how China has lifted hundreds of millions from poverty, while modernizing the country. There are also many Hong Kongers who enjoy growing personal, professional and business ties with China. In a recent poll, more than half of Hong Kong residents felt somewhat or strongly against the calls for independence.
The fact is that the fate of Hong Kong has always been linked to China, an integral part of its destiny because of history, culture and geography.
Independence is not an option for Hong Kong.
Like the rest of the world, Hong Kong people will have to cope with the reality of a rising and more powerful China.
My students will have to be prepared to tell stories of Hong Kong that have become darker and more complicated. They will have to navigate the tangled relations among Hong Kong, mainland China and the rest of the world. As citizens, they will have to struggle with the fact that Hong Kong might just be a pawn in the big global game among corporate interests and the great powers.
Tags: Beijing, China, China market, democracy, Hong Kong, Hong Kong has lost some of its luster, Hong Kongers, human rights, independence, Independence is not an option for Hong Kong, Kuala Lumpur, mainland China, Munich Re, Shanghai, Singapore, umbrella movement, Warren Buffett