The insurance industry has been a significant part of Hong Kong's financial sector, and local insurance business is expanding fast. At present, the industry is facing at least two broad categories of issues.

First, as a result of financial deregulation and innovation in developed economies, the lines dividing traditional financial activities have become blurred. Given Hong Kong's economic and financial openness and rising number of foreign financial institutions, the insurance industry must re-position itself to take advantage of changing environments.

Second, economic reform and fast growth in Mainland China have generated enormous demand for insurance services there. Despite the very restrictive official barriers to enter China's yet-to-be developed but huge market, it is still sufficiently attractive to capture the close attention of Hong Kong insurance companies, the more so now when the two economies are getting ever closer.

These two external factors, together with rapid development of the industry itself, warrant a detailed examination of the current situation and regulatory framework of Hong Kong's insurance industry. Moreover, to the extent that insurance companies are financial intermediaries and institutional investors, changes in the industry do affect the savings pattern and the channelling of funds in the economy, and may thus have macroeconomic implications.

The literature on the economic analysis of insurance is vast, but it is mostly theoretical and not directly applicable to the case of Hong Kong. On the other hand, in Hong Kong existing publications on insurance focus mainly on technical practices of the profession. This book fills the gap by discussing insurance in Hong Kong within a framework of economic analysis.

The author, Dr. Ben T. Yu, first discusses insurance in general, highlighting the insights of the theory of transaction costs. He then goes on to review the development of the insurance industry in Hong Kong, addresses the above issues in detail, and comes up with some policy recommendations. Professionals in insurance and finance, as well as policy-makers will all find this book a useful reference.