Why choose mainland China onshore solutions? PCS by Mercer Hong Kong CEO, Christina Wong gives you eight great reasons.

In the context of the People's Republic of China (PRC), onshore insurance refers to insurance solutions that are provided by insurance companies licensed for, and operate, within mainland China. The companies can be state-owned, privately-owned, or foreign joint-ventures with legal entities in mainland China.

They are regulated by the China Banking and Insurance Regulatory Commission, and their insurance products and services are subject to Chinese laws and regulations. PRC onshore insurance solutions are wholly purchased with the renminbi (RMB), and the solutions are specifically designed to meet the local market’s unique needs.

PCS by Mercer is a fully licensed broker of PRC onshore insurance, and we are specialists in tailoring solutions for high net worth (HNW) individuals.

 
(Click to enlarge, source: PCS by Mercer)

What are the Wealth Planning Benefits of Onshore Solutions for PRC Clients?

As China’s demographic shifts and wealth transfers to the next generations, onshore insurance present considerable asset management solutions. Broadly, they offer the comfort of certainty amidst a volatile global economic environment and potential changes in the legislative environment. Specifically, there are eight key reasons to explore onshore solutions:

1. Certainty in legacy planning and wealth transfer: Properly structured, insurance solutions allow HNW clients to transfer wealth to their beneficiaries in a tax-efficient manner. More importantly, you can have full control over the timing and quantity of wealth transfer, particularly as annuity products allow a steady and gradual transfer of assets rather than in lump sums.

2. Asset allocation and protection: The right onshore solutions can have generational benefits; offering the stability required when planning for timescales beyond a single lifetime. There are also other asset protection utilities.

3. Retirement planning beyond finances: Some onshore policies provide clients with guaranteed priority access to exclusive retirement villages for any generation within a family.

4. Simplify family protection: Some family structures are more complex than others. To avoid future conflict and enable effortless asset distribution, onshore insurance can be used for estate equalization and provide for all members of a family.

5. Tax efficiency: Onshore insurance products in China offer several tax advantages for clients and/or beneficiary(ies). A properly structured insurance policy ensures the death benefit does not form part of the deceased estate, and monies received by beneficiary(ies) are also free of income tax liabilities. The liquidity generated can well prepare the family for other potential taxes/obligations.

6. Investment diversification: Onshore insurance products can offer secure asset diversification and investment opportunities in the form of an alternative asset class with liquidity certainty that does not mark-to-market.

7. Stability: Annuity products are islands of stability during volatile times. They are insulated against currency and market fluctuations, providing consistent income, steady growth, and liquidity when you most need it.

8. Grow your wealth with guaranteed returns: Some onshore insurance products in China offer guaranteed returns, providing clients with a predictable income stream that can help them achieve their wealth planning goals.

PCS by Mercer’s Exclusive Medical Concierge Services for HNW Customers

Every jurisdiction has its unique medical systems and practices and most life protection insurance requires medical checks as part of the underwriting process. PCS by Mercer’s extensive networks and experience in the PRC means we can ensure you have the smoothest possible medical experience.

Our exclusive medical concierge service is specially designed for HNW clients. PCS by Mercer customers can choose to have the company of our consultants throughout their medical requirements, we are on hand at all times, to manage any potential challenges as they arise.

PRC Onshore Solution Case Study – Legacy Planning

Profile

PCS by Mercer client is a 55 year CEO and married with a teenage child. The CEO's net worth is around RMB 300M.

Key Considerations/Challenges Specific to the Client

The client is concerned about her child. She thinks the teenager loves the luxurious lifestyle of generational wealth, but that she is not interested in working to safeguard or grow that wealth. So, our client hopes to direct how her child uses the assets for as long as possible.

The client prefers to leave the entirety of her wealth to her child rather than her husband.

PCS by Mercer Solution

After considering our client’s needs against most of the onshore solutions available in mainland China. We suggested that she incepts an annuity plan:

  • Savings Plan paying an annuity of RMB 2.25 Million
  • Payments start when the client is closer to retirement age
  • From the first annuity payment, the cash value of the savings plan drops to zero
  • The client appoints her child as the «annuity beneficiary», so only she receives the annuity payments, which is scheduled
  • The premium of RMB 50 Million has been paid by the client in one lump sum payment.

Key Takeaways

Annuities plans help to secure steady income for the next generation in a regulated manner. By paying the entire premium, the client – the annuitant – achieves «zero cash value».

Zero cash value means an annuitant has fully committed all the funds in the plan towards purchasing the annuity.

By isolating the plan funds in this way, the annuitant also effectively removes the fund from consideration when their overall debt position is assessed.

PCS by Mercer are experts in helping you safeguard and transfer your wealth exactly how you wish.

Why choose PCS by Mercer?

PCS by Mercer is part of Marsh McLennan (NYSE: MMC), the world’s largest insurance broker and a S&P 500 company with a market cap of more than USD 80 billion. We have unparalleled infrastructure and scale. The scale is backed by financial strength, and our global framework gives you all the benefits of our international acumen in your PRC onshore experience.

Working with PCS by Mercer China means simplified inception and claims processes and the peace of mind that comes from partnering with the best.

Our scale brings you access. But beyond access, we are dedicated to redefining and delivering client-centric excellence in everything we do. You come first. From the moment we meet you right through to potential claims, we are with you.

Above all else, we value our relationships. We have built a leading team of banking, insurance and risk experts who are consistent in their expertise. Together, we are committed to providing you with the most effective and cost-efficient solutions.

Experience the PCS by Mercer difference.

Christina Wong joined PCS by Mercer in 2021 as the Hong Kong CEO. She leads teams across North Asia, including the PRC. Christina has over 20 years of experience in the insurance and banking industry. Prior to joining PCS, she was the Head of Third Party and Private Banking Distribution at HSBC Life. She was instrumental in the growth of its high-net-worth client segment and in achieving wealth model synergies across the HSBC Group. She has also held similar leadership roles at Transamerica Life Bermuda, MetLife and Zurich International Life.

This article is general in nature and not intended as specific advice. For advice, clients should consult their own tax experts before making decisions.