Hong Kong Insurance Authority: Insurance premium financing in Hong Kong shows an upward trend in the first half of the year, with its proportion in new business premiums rising to approximately 36%.

The Hong Kong Insurance Authority announced that the proportion of premium financing business in Hong Kong's total new business premium for the first half of this year has increased to about 36%, a significant rise from 21% in the same period last year, indicating an overall upward trend. The Hong Kong Insurance Authority pointed out that the products currently involving premium financing are mainly whole life participating insurance policies, which are designed for long-term wealth accumulation or inheritance. However, if a large number of customers adopt premium financing leverage and are inclined to terminate their policies early upon reaching expected returns or loan maturities, it will lead to a disparity between the actual lapse rate of policies and the product design assumptions, which in turn could adversely affect the overall financial robustness of insurance companies. The Hong Kong Insurance Authority noted that some insurance companies are attracting customers by increasing premium discounts, while banks are offering higher loan-to-value ratios, practices that further amplify the leverage risk of premium financing policies. High-leverage operations can lead to an excessive emphasis on short-term high returns during the sales process, while neglecting the potential risks that amplify concurrently. If related sales tactics are not subject to sustained close monitoring, it can easily violate the principle of "treating customers fairly." To this end, the Hong Kong Insurance Authority has mandated that all insurance companies must implement robust internal control procedures and strictly comply with regulatory standards related to premium financing. In addition, the Hong Kong Insurance Authority, in conjunction with the Hong Kong Monetary Authority, has initiated a new round of thematic inspections focused on premium financing business, with related review work still underway. Data shows that the Hong Kong Insurance Authority had previously issued a circular in 2022, providing clear guidelines on the assessment of affordability for premium financing, excessive leverage risks, data disclosure, marketing practices, and professional training for practitioners.