MPF profitability hit

Service providers for Hong Kong’s new Mandatory Provident Fund (MPF) programme must as of today raise capital reserves for MPF guaranteed funds, according to a letter that was sent yesterday (Monday) by the Officer of the Commissioner of Insurance. The rules also mean additional systems costs to model the new reserve requirements. This has caused a furore among insurance companies, which offer the majority of such funds. Many firms already face a horizon of up to 10 years before they expect to break even on MPF business. The new rules, which could raise costs dramatically, will add to pressures at some small- and mid-sized players to drop out of the MPF business.