HONG KONG-Swire Insurance Holdings Ltd., part of Swire Pacific Ltd., is withdrawing from underwriting, though it will keep its brokering operations.

Subject to the approval of local authorities, Hong Kong-based Swire will sell its 49% stake in Taikoo Royal Insurance Co. Ltd. to Royal & Sun Alliance Insurance Group P.L.C., which will then fully own Taikoo Royal and merge it with the Sun Alliance Hong Kong branch.

Zurich Insurance Group will buy the 25% of Zurich Insurance Co. (Asia) Ltd. that Swire now owns, along with Swire's 35% interest in Wing Hang Swire Insurance Co. Ltd. and 60% interest in Paofoong Insurance Co. (Hong Kong) Ltd.

In addition to buying into Wing Hang-which is a joint venture with Paofoong and the Wing Hang Bank, Hong Kong-Zurich is acquiring local holding, management and distributing companies. Last year, Zurich Asia's premium income totalled $30 million; Swire's was about $10 million. The balance of Paofoong is owned by Shanghai Commercial & Savings Bank Ltd.

Once regulators have approved the deals, they will be effective retroactively from Jan. 1 this year.

The Swire Fraser Ltd. brokering operation will not be affected by the decision to sell off the underwriting operations, confirmed Garth Bearman, chief executive and chairman of Swire Fraser in London.

Swire's decision to withdraw from underwriting forms part of its move toward concentrating on core activities, said Executive Director James Hughes-Hallett, at a time when the British colony is gearing up for repatriation to China at the beginning of July. A spokeswoman for Zurich confirmed Swire made the first move, approaching Zurich with an offer to sell.

Both deals have a confidentiality clause about the amount paid for the former Swire insurance operations, though a Royal & Sun Alliance spokeswoman said the deal was for less than 0.5% of its value at June 30, 1996. Royal & Sun Alliance was valued at (British pounds) 6.23 billion ($10.36 billion) then, meaning it will pay less than (British pounds) 31.2 million ($51.9 million) for the balance of Taikoo Royal.

Taikoo Royal and Sun Alliance's Hong Kong office together posted premium volume of (British pounds) 27 million ($44.9 million) for 1995. The insurer has no immediate plans for further investment in its Hong Kong operations, though "we would hope to increase the business written in Hong Kong," said the Royal & Sun Alliance spokeswoman. "We still see Hong Kong as a very important future growth area," she said.

Robin Rowland, group director of international operations at Royal & Sun Alliance, said: "Once we have completed the purchase and merged the two operations, Royal & Sun Alliance will be one of the biggest non-life insurance companies in Hong Kong. This will give us an excellent base for future development."

Royal & Sun Alliance's three Chinese contact offices in Beijing, Shanghai and Dalian still are awaiting licenses to start trading, and the British government is backing the insurer in its bid to become the first admitted U.K. insurer in the country.

Although there are pockets of concern about the effects of the looming Chinese rule on the Hong Kong business sector, the general feeling is that it may present an accelerated opportunity to enter the mainland Chinese market. The reversion to Chinese rule on July 1 is not expected to hinder the license process, said the Royal & Sun Alliance spokeswoman.

The Zurich spokeswoman said the insurer is "very optimistic" about the prospects for a Chinese-run Hong Kong, though it will take until at least August before any outcome is known. "Our people in Hong Kong are very positive," she said, and Zurich expects to expand operations there.

Zurich has representative offices in Beijing and Shanghai.