Mainland visitor policies historically account for about 30% of life sector new business.

Hong Kong insurance companies face potential sales slowdowns and increased compliance costs as regulators clamp down on unauthorised cross-border investments from mainland China.

Whilst the direct impact on insurers is expected to be limited, the sector could see an increase in administrative hurdles, according to a report published today by S&P Global Ratings.

“This may encompass added checks on source-of-funds or marketing activities. Such an event would weigh on mainland Chinese visitor-driven sales, which historically account for about 30% of new business in the life insurance sector,” S&P Global Ratings credit analyst Judy Chen, said in a report.

Chen added that Hong Kong insurance products sold to mainland visitors are already tightly regulated. Current rules require buyers to be physically present in Hong Kong to sign policies, use only licensed distributors, and undergo rigorous compliance checks.

The report also said that Hong Kong banks are experiencing a more immediate impact from this regulatory shift.

Following new guidance from the Securities and Futures Commission and the Hong Kong Monetary Authority on 3 June, some banks have already suspended opening new investment accounts for mainland residents.

S&P Global Ratings credit analyst Will Hau stated that the impact on most banks will be gradual, as the majority already maintain robust "know your client" compliance and operate through approved connection schemes.

In fact, these regulated banks could eventually absorb funds that previously flowed through illegal routes.

However, banks with aggressive customer acquisition strategies or weaker control frameworks face a heavier operational burden, which could lead to tighter account controls and closures.