In order to tap investor expectations of a rising yuan (RMB), insurers are preparing to launch yuan-denominated policies as a new product offering for insurers in the Hong Kong market. Insurance premiums make up almost 10% of Hong Kong’s GDP, compared with just 3% of China’s GDP.

The move could provide a long-term growth opportunity for insurers active in Hong Kong, although it may also create secure asset-liability mismatch issues for the companies. Reuters suggests that the launch of yuan-denominated policies may also raise the question of whether insurance could be used as a vehicle for unnecessary speculation.

The biggest downside to the development of new products is the lack of investment options for yuan holders, a reality that could leave insurers with a large amount of yuan collected as premiums but with nowhere to invest it. Yuan products are highly limited for non-Chinese nationals and companies at present, as Chinese securities and debt markets are closed to them.

Hong Kong has become the centre for a number of Beijing’s experiments with the yuan as it takes steps towards its ultimate aim of placing the yuan alongside the US dollar as one of the world’s preferred reserve currencies.