Hong Kong captive momentum building following HSH launch

The Hongkong and Shanghai Hotels (HSH) selected Hong Kong as the domicile for its new captive insurance company in part due to the jurisdiction’s competitive regulatory requirements and commitment to developing its captive sector.

The 160-year-old luxury hospitality and real estate group, which owns assets across Asia, Europe and the US, established the captive in July this year, initially covering property damage and business interruption risks (PDBI).

Speaking to Captive Review alongside representatives from WTW and AXA XL, which supported the captive’s formation, HSH group general manager, audit and risk management, Kitty Wan, explained that the business’ favourable claims experience, long-term ownership philosophy and growing awareness of the limitations in commercial insurance had all been factors in its decision to establish a captive.

“First of all, we became very aware of our excellent claims and loss experience, which is well below the industry standard,” she said.

“And, secondly, in recent years we’ve also become increasingly aware that not all risks are insurable. So, for example, if we look at COVID, which really impacted our business to 2022, that obviously was a huge risk that we as a company had to manage. But unfortunately, that’s not a risk that we can transfer to the insurance market, and so we’ve had to manage internally ourselves.”

But also core to the decision was what Wan described as a strong long-term risk management philosophy built around protecting the group’s assets, employees and operations.

Steve Hutchinson, head of corporate risk and broking for Hong Kong and Macau at WTW, said HSH’s approach differed from many captive formations that have historically been motivated by insurance market challenges.

“We often see captives being born out of necessity. It’s something that is set up because there is a problem in risk or there’s a lack of insurance or insurance has been withdrawn,” he said.

“This captive is different. It’s born out of a long-term risk management strategy, and I think it made perfect sense to start with PDBI, given the nature of HSH’s occupancy.”

Jamie Chambers, CEO of AXA XL Greater China, added that HSH had demonstrated a clear strategic vision from the outset of the process.

“What really stood out for me going through this experience with HSH comes back to the original tender process that we had in probably March of 2025, and Kitty had a very clear direction about the journey that she wanted to go on,” he said.

“It really does hark back to this strong risk management philosophy that exists within the organisation, and the motivation being very much a strategic long-term vision around the benefits of the captive as opposed to being born out of necessity.”

Domicile choice

Wan said that while the group considered more established domiciles for a captive, including the Cayman Islands, Hong Kong’s increasingly supportive regulatory environment and HSH’s history in the jurisdiction ultimately made it the natural choice.

“With our deep roots in Hong Kong, it was more of what were the reasons not to establish the captive in Hong Kong, and I think to be honest, we couldn’t find too many,” she said.

“Obviously, there’s a lot of other competitive captive jurisdictions out there. But the Hong Kong Insurance Authority (IA) have come out and said that this is a strategic goal for Hong Kong. They’re very much creating legislation and regulations which want to foster the development of captives in Hong Kong.”

There are currently nine captives domiciled in Hong Kong, three of which have been formed this year. That followed two new formations in 2025, the first since 2018, as the IA has in recent years sought to market itself as a captive-friendly jurisdiction.

Wan explained from a regulatory perspective, Hong Kong is already an attractive option.

“When we looked at the compliance requirements, studied them, they were not more onerous,” she added. “In fact, in some aspects, they were perhaps slightly more favourable than other jurisdictions.”

Beyond the jurisdiction’s regulatory framework, HSH was also encouraged by the IA’s willingness to work towards an ambitious timetable for the captive’s establishment.

The process took approximately three to six months, allowing HSH to meet its objective of having the captive operational ahead of its insurance renewal.

Wan said the regulator had been accessible throughout the process and had demonstrated a commitment to supporting the formation.

“The insurance authority really worked hard to support our time objective,” she added. “They were very accessible with any questions that we had, provided us with guidance, and we made the timetable that we set out to make.”

Hutchinson said the relatively small number of captives established in Hong Kong meant they went into the process with some caution in the early stages, but praised the IA’s responsiveness.

“They had a lot of questions when we first started out, some of which we were struggling to understand where they were coming from, but we worked through it with them,” he said.

“They were super responsive. Every time they asked a question, Kitty and the team and us were able to provide the answers. They did review it quite quickly. They came back quite quickly. They understood the timeline, and they worked through it.”

Future expansion

With the captive now operational, HSH intends to gradually expand its role in the group’s risk financing strategy.

The company currently purchases more than 20 lines of insurance globally, creating opportunities to consider retaining additional risks as the captive develops.

However, Wan said the immediate priority was to stabilise the existing PDBI programme before pursuing further diversification.

“That really is one of the long-term strategic objectives of a captive, to also look at which risks cannot be transferred to the external market, so which you might want to take in internally,” she said. “That is probably a longer-term aspiration. In the meantime, our immediate goal is to build and stabilise our current captive.”

Terrorism coverage has emerged as a potential next addition, given its relationship with the group’s property risks.

“I think there’s more synergy between that and property damage,” she said of terrorism risk. “The captive is still at its development phase at the moment. So, I want to look at risks which have a natural synergy, an efficiency with the existing line of risk, so that we can continue to stabilise and build the captive.”

Attracting attention

HSH’s captive formation has attracted considerable attention from other businesses considering captive solutions, providing a potential boost to Hong Kong’s ambitions to develop its captive sector.

Wan said she had been surprised by the level of interest generated by the announcement, including enquiries from peers seeking to understand HSH’s experience.

AXA XL has also seen a rise in enquiries from prospective captive owners and brokers following the announcement.

Evelyn Pang, multinational solutions & captive manager, Asia for AXA XL said the interest was encouraging, although that many prospective owners remain at an early stage of considering a captive.

“After the news came out, we received a lot more broker and client enquiries around the formation of captives,” she said.

“Most of the enquiries are sitting at quite a premature stage because a lot of clients are not familiar with captives.”

She added that the growing interest was beginning to stimulate investment in Hong Kong’s captive services sector.

“We have seen a trend of brokers recruiting captive managers to set up their expert captive team in Hong Kong,” she said.

“Previously, quite a lot of captive managers would sit in Singapore, but there’s definitely a lot more recruitment going on, and I think the market is very excited to gear Hong Kong up for the next stage of growth.”

Chambers added that recent formations, including HSH, had helped demonstrate that Hong Kong was capable of delivering captive solutions within a reasonable timeframe, encouraging businesses that had previously considered a concept to revisit their plans.

“It really serves as a demonstration that it can be done. While the jurisdiction has been there, we haven’t seen this kind of momentum in recent years, so this really does serve as a demonstration that captives can be formed. They can be formed in a good reasonable timeline, and I think this is only going to encourage that future growth.”

Chambers said he believed there was a strong pipeline of prospective captive owners,  while there is also the possibility of existing captives owned by Hong Kong-headquartered companies relocating to the jurisdiction.

Chinese opportunities

Beyond Hong Kong-based multinationals, AXA XL also sees growing opportunities among Chinese businesses expanding internationally.

Pang said Hong Kong’s captive market had historically been dominated by Chinese conglomerates operating in the energy and industrial sectors, but the IA was now seeking to attract a wider range of businesses.

“They need to jump out from the box and explore if segments like hospitality, manufacturing, logistics, or even commodity markets will have interest in setting up a captive?” she said.

“I think that approach also will be driving a lot of new conversations with various industry leaders, because now they are no longer sitting in their circle talking about traditional risk transfer tools.”

Chambers said the international expansion of Chinese companies was also contributing to a broader evolution in corporate risk management across the region.

“We’ve seen a strong growth in global programme solutions, and I think a natural evolution of that is for organisations to consider captives, but also to consider captives as true risk management tools, vehicles, solutions for themselves, rather than maybe purely focusing on the financial motivators that we probably saw historically,” he said.

“I think that evolution of risk management within Asia, and particularly as Chinese organisations look to go overseas, is really driving what we’re seeing in Hong Kong and the development of Hong Kong as a risk management hub and captive jurisdiction.”

For HSH, the prospect of further captive formations would also help address one of the jurisdiction’s current shortcomings by supporting the development of a larger community of captive owners and service providers.

“At the moment, I’m a bit lonely, so it would be great to have an ecosystem around in Hong Kong,” Wan said.

“I attended the Singapore Asia Pacific Captive Forum, and it’s exciting to have an ecosystem around you, people that you can engage with about captive matters. What are they doing, etc. So, it’d be lovely to see that build out in Hong Kong.”

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