Recently, the Hong Kong Inland Revenue Department announced that the Legislative Council of Hong Kong passed the Inland Revenue (Amendment) (No. 3) Bill 2013 on March 19, providing tax concessions to captive insurers by halving the profits tax on their offshore risk insurance business. The measure will be put forward in the 2013-14 Budget and will take effect from the 2013-14 year of assessment.

       Secretary for Financial Services and the Treasury K.C. Chan said: "The tax concessions will further encourage groups or enterprises to consider establishing captive insurers in Hong Kong to underwrite the risks they face."

Chan said: "Hong Kong's fundamental strengths as an international financial centre include a simple tax regime, the rule of law, an abundant supply of talent, the free flow of information and capital, and a highly open and competitive operating environment. Hong Kong therefore has the potential to become a captive insurance centre."

Chan pointed out that developing captive insurance can consolidate Hong Kong's position as an insurance hub in the region, diversify Hong Kong's risk management services, and drive the development of other related professional services, including reinsurance, accounting, actuarial and legal services.
According to the website of the Hong Kong Inland Revenue Department, the Central People's Government announced a policy in June 2012 encouraging Mainland enterprises to establish captive insurers in Hong Kong so as to strengthen their risk management. This also helps consolidate Hong Kong's development into a captive insurance centre. As the operations of Mainland enterprises become increasingly internationalised and specialised, they will make greater use of captive insurance to reduce insurance costs and improve risk management.

Chan added: "We will continue to step up promotion and, through our economic and trade networks, attract more enterprises to establish captive insurers in Hong Kong."