Insurance Authority Warns of Premium Financing Risks, Launches Joint Inspection with HKMA
SingTao · 2 SOURCESabout 3 hours ago2 MIN
Summary
The Insurance Authority (IA) issued a circular on March 20 urging insurance companies to strengthen internal controls and comply with regulatory standards governing premium financing products. The warning comes as premium financing business surged to 36% of new business premiums in H1 2026, nearly doubling from 21% in H1 2025. The regulator has launched joint thematic inspections with the Hong Kong Monetary Authority (HKMA) amid concerns about sales misconduct and financial stability risks.
Key Points
- Premium financing represented 36% of new business premiums in H1 2026, jumping from 21% year-on-year
- Insurance Authority and HKMA launched a new round of joint thematic inspections on premium financing, currently ongoing
- Products involved are mainly whole life participating insurance policies designed for long-term wealth accumulation
- Some sales materials claimed customers could achieve 9x policy leverage by paying only 10% of premiums
- The IA found cases of improper promotion and selective disclosure of risks by sales personnel
Why It Matters
The rapid growth of premium financing products, combined with potential mass early surrenders, could expose insurers to liquidity mismatches if they hold illiquid assets like private credit or private equity. The joint regulatory action signals authorities' concern that aggressive sales practices may violate fair customer treatment principles, potentially damaging consumer confidence in the insurance sector .
The rapid growth of premium financing products, combined with potential mass early surrenders, could expose insurers to liquidity mismatches if they hold illiquid assets like private credit or private equity. The joint regulatory action signals authorities' concern that aggressive sales practices may violate fair customer treatment principles, potentially damaging consumer confidence in the insurance sector .