Hong Kong-listed insurance stocks are under heavy selling pressure, with AIA (01299) falling 7.85% to HKD 71.65 and PRU (02378) dropping 5.36% to HKD 107.60 as of the latest trading session.

According to a report on August 5, mainland Chinese tax authorities have begun levying a 20% individual income tax on gains from overseas insurance policies. Industry sources, including tax lawyers and insurance professionals, indicate that enforcement measures have already been implemented in Beijing and Hangzhou. This tax applies to all income generated from Hong Kong insurance policies, including dividends and interest earned on prepaid premiums.

Analysts at Jefferies note that taxing overseas insurance policy gains will reduce the appeal of Hong Kong's insurance products compared to those available on the mainland, putting pressure on sales. However, they also suggest this move may alleviate market fears of an outright nationwide ban on offshore insurance sales. Meanwhile, Morgan Stanley previously stated that business from mainland Chinese visitors represents only about 21% of AIA's new business value. The remaining nearly 80% of its non-mainland visitor business is performing broadly on track, and Tata AIA in India has become a long-term growth driver for the company. Additionally, PRU attributed a 12% rise in new business profit in its key financial hub to growth from both local customers and mainland Chinese visitors, as reported in its annual results published in March.