The impending ‘greatest wealth transfer’ in history which will take place over the next two decades is creating a ‘tidal wave’ of demand for insurance products which can enable succession planning and wealth transfer, according to HSBC Insurance’s CEO Edward Moncrieffe.
Moncrieffe was speaking on a wealth management panel at a conference hosted by the Hong Kong Insurance Authority and he alluded to the impending generational wealth transfer, which will see the baby boomer generation pass on US$84 trillion of assets over the next two decades.
While attention has focussed on the US which has the greatest concentration of wealth globally, the rapid expansion of Asian economies over the last two and half decades means the region is now the second largest repository of wealth in the world, having overtaken Europe in 2009.
“There is now a tidal wave of demand for insurance products which enable wealth transfer and succession planning.
This first generation of private wealth in Asia has reached a certain age and started estate planning, looking at issues like the ability to pay forward the estate, the divisibility of a policy with named beneficiaries, and the privacy and liquidity that insurance offers mean it is a very useful solution for wealth transfer,” Moncrieffe.
Flexible products
Fellow panellist Philipp Witherington, CEO of Manulife Asia said that the flexibility of the current generation of insurance products meant they were able to adapt to changing life circumstances which supported their use in succession planning.
“The policy I have today doesn’t just fulfil the needs I have but it will cross generations so that my children can inherit it. Because I have two children, the policy can be split into two components, and if they decide to move to the US or Hong Kong the policy’s denomination can be switched as well.
As a parent that is very comforting because it’s a reality of life that one day you will die and you don’t want to leave a burden to your children. And so, leaving an asset class that transfers across generations without creating a tax burden, or the stress of dealing with a cash lump sum.
I would advocate for insurance to have a greater place in wealth management portfolio allocation,” Witherington said.
World record policy
Last month Swiss Re put out a report highlighting the potential for expansion of the HNW insurance sector in Asia Pac and the firm’s regional Chief Economist highlighted the capacity of the local insurance ecosystem to write large policies and this point was echoed by Moncrieffe.
The HSBC CEO referenced the firm’s world record $250m life insurance policy, which it wrote earlier this year, and he said that Hong Kong was the natural home for this type of business.
“Those types of risks can only be written in Hong Kong because the balance sheets are bigger. The access to capital markets is bigger, the reinsurance capacity is bigger. The choice of advisors whether you look at the private banks, or the asset managers, is bigger and broader.
So, as you go up the food chain, you’re going to increasingly see Hong Kong’s right to win in writing these big risks and solving for the ultra-high net worth demand across Asia and across the region,” he said.
Despite concerns over China’s post-Covid economic recovery Moncrief said that China would remain the engine of high network growth in the region over the coming years. He cited recent research by BCG which predicted that 60% of all wealth creation in Asia over the next five years would originate in the country.
“The China wealth market is worth about $30tr, and its growing at 9% annually, and obviously HSBC Insurance wants to capture our fair share of that but it also an opportunity for all Hong Kong brands which have been around for some time and built those intangible qualities of trust and security and reliability,” Moncrieff said.
The HSBC Insurance CEO also warned that despite Hong Kong’s strong strategic advantages for HNW business it also needed to be conscious of the mobility of wealth and that the city state also had to deal with competition from other international, financial centres.
“Offshore, international wealth is mobile. It’s not constrained by borders. Hong Kong is competing against other IFCs, and we must not get complacent,” he said.
