The regulator, running a deficit, is also reviewing premium-financed sales
The Insurance Authority (IA) has proposed raising the premium levy cap on long term policies by up to tenfold, a change that would only reach policies with premiums above HK$100,000 (US$12,746).
The consultation, launched on November 4, 2026, arrives while the regulator is also reviewing how insurers and intermediaries sell premium-financed life policies.
The per-policy premium levy cap would rise from HK$100 (US$12.75) to either HK$500 (US$63.73) or HK$1,000 (US$127.46), while the 0.1% rate would stay unchanged. At that rate, the higher caps would apply from HK$500,000 (US$63,730) and HK$1 million (US$127,460) in premiums, respectively.
The IA’s announcement did not specify which policies would fall under each proposed cap. The consultation paper on the IA website sets out the full proposal, and comments are due on or before December 3, 2026.
A ceiling unchanged since 2021
The premium levy started at 0.04% of premiums on January 1, 2018, and moved gradually to its 0.1% target, with caps of HK$100 (US$12.75) for long term policies and HK$5,000 (US$637.30) for general policies in place since April 1, 2021.
A Financial Services and the Treasury Bureau paper on the IA’s 2026-27 budget said these caps had caused a notable divergence between market-wide premium growth and the levy income the IA receives.
The paper projected IA income of HK$589.6 million (US$75.15 million) for 2026-27 against operating expenditure of HK$655.4 million (US$83.54 million), which leaves a deficit of HK$65.8 million (US$8.39 million).
It also projected a cash reserve of HK$518.6 million (US$66.10 million) by March 31, 2027, above the HK$327.7 million (US$41.77 million) needed to cover six months of operating expenditure.
The government noted a headcount freeze at the IA for 2026-27 and urged the regulator to explore options that would improve its long-term financial sustainability.
An IA spokesperson tied the review to the regulator’s funding model.
“The review is carried out in accordance with original design of our funding mechanism to ensure that the IA can effectively discharge its statutory functions on a sustainable basis, while limiting the impact on policy holders and international competitiveness of the insurance industry,” the spokesperson said.
Premium financing under the microscope
Premium financing, which uses borrowed money to fund the purchase of long term policies, made up about 36% of new business premiums in the first half of 2026, up 15 percentage points year over year.
The Insurance Authority issued a circular on related risks, including sensitivity to interest rates, leverage, and lapses, and it said higher leverage may lead to sales practices that focus on short-term yields over the magnified risks.
According to the South China Morning Post, premium financing accounted for 12% of new business premiums in 2024 and 19% in 2025.
At an October media briefing, Marty Lui, the IA’s executive director of long term business, said some insurers had “promoted it too aggressively” through lower thresholds and high leverage, and the IA expects to complete an inspection by late 2026.
Caproasia reported that the IA’s premium financing review also covers intermediaries who give financing advice without authorization or training, client profiles that list assets but not liabilities, and cases in which borrowing costs exceed policy returns.
Long term sales keep climbing
New office premiums for long term business, excluding Retirement Scheme business, rose 51.1% to HK$141.1 billion (US$17.98 billion) in Q1 2026, according to IA provisional statistics. That figure equaled about 43% of the HK$330.9 billion (US$42.18 billion) recorded for all of 2025.
Read more: Hong Kong insurance market extends growth run as data gap widens
The IA’s latest available figures show mainland visitors generated HK$62.8 billion (US$8 billion) in new business premiums in 2024, or 28.6% of new individual office premiums. Whole life accounted for about 59% of the policies they bought.
The IA has withheld separate mainland visitor statistics since Q1 2025 while it reviews how it collects non-local policyholder data. Its first-half 2026 statistics, released October 23, showed total gross premiums of HK$573.6 billion (US$73.11 billion), up 35.5%.
Read next: Hong Kong insurance underwriting profit surges 253% as market posts $573.6b in premiums
Insurers’ fee ceiling quadruples
The cap on the variable component of annual fees for authorized long term insurers would rise from HK$7 million (US$892,220) to HK$28 million (US$3.57 million). The rate would move from 0.0039% to 0.0042% of insurance liabilities.
The proposals would amend the Insurance (Authorization and Annual Fees) Regulation (Cap. 41C), which was made under section 128 of the Insurance Ordinance (Cap. 41). They would also amend the Insurance (Levy) Order (Cap. 41J), which was made under section 134.
Earlier this year, the IA consulted on changes to its risk-based capital rules, and the revised framework is set to take effect by the end of 2026 if Legislative Council negative vetting proceeds without objection.
