Hong Kong-listed shares of major insurers tumbled on Thursday after a report that Chinese mainland tax authorities have begun levying taxes on income earned from offshore insurance policies, raising concerns over demand from mainland customers, Reuters reported.
The selloff followed a Caixin report stating that tax authorities in Beijing and Hangzhou have started applying a 20% personal income tax on returns from Hong Kong insurance policies. The tax reportedly covers dividend payouts and interest earned on prepaid premiums, a move that analysts believe signals tighter scrutiny of offshore investments by Chinese authorities.
The report weighed heavily on insurance stocks in Hong Kong. AIA Group shares fell 8.2%, while Prudential dropped more than 5%. Hong Kong-based FWD Group declined 4.5%, contributing to a more than 2% fall in the Hang Seng Index during early trade.
Reuters reported that China's Finance Ministry and the National Financial Regulatory Administration did not immediately respond to requests for comment on the matter.
Hong Kong's insurance market has long attracted mainland Chinese customers seeking overseas financial exposure. Insurance products sold in the city typically offer broader protection than comparable mainland policies, while many savings and investment-linked products are denominated in U.S. dollars.
Demand for such offshore policies has strengthened in recent years as declining domestic bond yields reduced returns on insurance products available in mainland China.
The latest tax development also weighed on Chinese insurers with significant offshore operations. Shares of Ping An Insurance and China Life Insurance both fell more than 1% amid concerns that demand for Hong Kong-based products could weaken.
Banking stocks with substantial insurance businesses were also under pressure. HSBC's Hong Kong-listed shares declined 2.2%, while Standard Chartered slipped 1%.
The prospect of taxation on offshore policy income has raised fears that sales of insurance and related financial products to mainland Chinese customers could slow, affecting insurers that rely heavily on cross-border business.
Hong Kong was Prudential's largest profit contributor in 2025. The insurer had previously attributed double-digit growth in new business profit in the city to strong sales among both local customers and visitors from mainland China.
Prudential's London-listed shares had already come under pressure, falling as much as 13% on Wednesday following the initial report.
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