Hong Kong Insurance Regulatory Authority: Premium financing in Hong Kong showed an upward trend in the first half of the year, accounting for the proportion of premiums for new construction businesses to about 36%

The Zhitong Finance App learned that the Hong Kong Insurance Regulatory Authority announced that Hong Kong's premium financing business in the first half of this year increased to about 36% of the total premium ratio for new construction businesses, a significant increase from 21% in the same period last year, showing an overall upward trend.

According to the Hong Kong Insurance Regulatory Authority, the products currently involved in premium financing are mainly lifetime dividend life insurance policies, which were originally designed to accumulate or inherit long-term wealth. However, if a large number of customers use premium financing leverage and tend to withdraw early when the policy reaches the expected return or the loan expires, it will cause the actual failure ratio of the insurance policy to deviate from the product design assumptions, which in turn will adversely affect the overall financial soundness of the insurance company.

According to the Hong Kong Insurance Regulatory Authority, it has noticed that some insurance companies attract customers by increasing premium discounts and banks by increasing loan ratios. Such practices have further amplified the leverage risk of premium financing insurance policies. Highly leveraged operations can easily cause the sales process to place too much emphasis on short-term high returns, while ignoring the potential risk of simultaneous expansion behind it. If relevant sales practices are not continuously closely monitored, they can easily violate the principle of “fair customer treatment.”

To this end, the Hong Kong Insurance Regulatory Authority has required all insurance companies to implement sound internal control procedures and strictly abide by regulatory standards relating to premium financing. Furthermore, the Hong Kong Insurance Regulatory Authority, together with the Hong Kong Monetary Authority, has launched a new round of thematic inspections on premium financing businesses. The relevant review is still ongoing.

According to data, the Hong Kong Insurance Regulatory Authority also issued a circular in 2022 to clearly regulate the affordability assessment of premium financing, risk of excessive leverage, data disclosure, marketing methods, and professional training for practitioners.