Shares of HK insurers hit by report of national tax

Shares of major Hong Kong insurers plummeted on Thursday following a report claiming that national authorities in Beijing and Hangzhou are imposing taxes on insurance policy income earned outside the mainland. Caixin published the controversial information on Wednesday, revealing that Beijing is levying a 20 percent personal income tax on returns from Hong Kong insurance policies, including dividends and interest from prepaid premiums.

Analysts view this move as Beijing increasing its scrutiny of non-mainland investments, leading to sharp declines in AIA Group, Prudential, and FWD Group shares. The Hang Seng Index fell over two percent in early trading on Thursday. Hong Kong insurance has historically served as a conduit for Chinese investors seeking to buy assets outside the mainland, with policies offering stronger protection than domestic options.

The recent decline in domestic bond yields has also boosted the popularity of offshore insurance products. Other Hong Kong-listed companies, such as Ping An Insurance and China Life Insurance, also experienced declines due to their substantial offshore businesses with Hong Kong assets. Major banks HSBC and Standard Chartered, which have significant insurance divisions, also saw their shares drop by more than 2.2 percent and 1.5 percent, respectively.

The news has raised concerns about a potential slowdown in sales of insurance policies and other financial products, as Chinese customers may be hesitant to purchase insurance from Hong Kong amid the new tax regime. Prudential, Hong Kong's largest profit contributor in 2025, reported a 12 percent growth in new business profit in the financial hub, largely attributed to increased sales from both domestic customers and mainland visitors. Hong Kong-listed Prudential shares fell by as much as 13 percent on Wednesday.