Chan Kin-por, legislator representing the insurance sector in Hong Kong's Legislative Council, recently told the South China Morning Post that many customers and insurance agents have urged him to seek a regulatory change to help the launch of yuan-denominated policies as many people believe that the yuan will appreciate in value over the next few decades and yuan life insurance policies may bring policyholders 20% to 50% growth in terms of investment returns and valuation gains. Yuan policies would allow premiums to be paid in yuan and benefits to be paid out in the same currency.

Chan said that the key hurdle is the current rules governing matching assets and liabilities. As the yuan is not a freely convertible currency, it would be very difficult for Hong Kong insurers to demonstrate to the Insurance Authority that they had enough yuan on hand to pay out any compensation and to ensure smooth yuan settlement.

Current Chinese mainland rules do not yet allow insurance companies to open or maintain yuan accounts with banks in Hong Kong as banks in the Special Administrative Region can only offer yuan accounts for individuals and seven industries which have retail exposure to yuan. Furthermore, due to the lack of yuan-denominated bonds and shares trading in the Hong Kong market, companies issuing yuan policies would find it hard to invest the premiums in yuan instruments.

At present, only Chinese mainland-backed Bank of China Group Insurance Co Ltd and China Life Insurance (Overseas) Co Ltd have launched a handful of yuan policies in Hong Kong.

Commissioner of Insurance in Hong Kong, Annie Choi Suk-han, said the regulator is closely monitoring the desire of local insurance companies to issue insurance policies in yuan.