Aon brokerage announced today it is opening a Hong Kong officeas a location to base captive insurance operations that can takeadvantage of the flow of commerce toward China.

Stephen Cross, chief executive officer of Aon Captive ServicesGroup (ACSG), told National Underwriter from Dublin, Ireland, thatbusiness going into China and privatization of some industrialgroups has created an “interesting market. We believe we're gettingin on the ground floor level.”

Mr. Cross said he is currently working with the Hong Konginsurance regulator to come up with captive legislation with some“distinguishing features” from other captive domicile competitors.“We've got to have something to differentiate to make it moreattractive so we can advance this concept along,” he added.

He said the Hong Kong regulators were savvy about captives, andthat “our timing is right, both from the market side and theregulatory side–they seem really excited about it.”

Aon said the office will enable it to take advantage ofincreasing risk exposures coming out of the Asia Pacific region,particularly China, as well as to increase the choice of captiveoperations for its existing clients.

Mr. Cross said in a statement that captives, while not a newconcept, “are relatively new to Asia. Aon sees a large number ofemerging companies from this region that would fit the typicalcaptive profile.”

He said that in particular, mainland China “is witnessingphenomenal levels of direct foreign investment, which in many casestake the form of a joint venture structure. This will furtherenhance opportunity for Hong Kong-based captives.”

The Hong Kong office will be overseen by Clive James, the newlyappointed group managing director of Aon Insurance Managers (AIM)Global.

AIM, said Aon, is witnessing a rapidly growing demand forcaptives from the Asia Pacific marketplace, seeing growth inAustralia and Japan, where clients have historically used Singaporeas a domicile.

In addition, alternative risk transfer opportunities willincrease as the Chinese economy continues to grow, with Hong Kongwell placed to capitalize, Aon said.

Mr. James said, “As the recognized leader in the captive market,ACSG will always establish locations aligned to future clientdemand. Hong Kong is our 29th office in a captive jurisdiction andour second in Asia, alongside Singapore.”

He added that “with more than 1,350 clients worldwide, wecontinue to strive to broaden the options for our clients and willlook toward further expansion into 2007.”