How could capital relief boost Hong Kong insurers’ returns?

The rules are feeding demand for staff with digital and regulatory skills.

Proposed changes to Hong Kong’s insurance capital rules could lower funding needs for some insurers and nudge them toward infrastructure assets, though the overall credit impact is likely to be limited, Fitch Ratings, Inc. said.

The Hong Kong Insurance Authority has proposed amendments to its risk-based capital regime, including more favourable treatment for certain infrastructure investments. Lower capital charges mean insurers would need to set aside less capital against qualifying assets.

Fitch said this could encourage life insurers to increase exposure to infrastructure projects, especially in Hong Kong and Mainland China.

These assets often generate long-term, stable cash flows that match insurers’ long-dated policy liabilities.

Cheaper capital treatment makes infrastructure more attractive on paper. But Fitch expects any shift to be gradual. Infrastructure holdings among Hong Kong insurers it rates remain small. Firms are unlikely to overhaul portfolios unless the returns justify the risks, the debt watcher said.

Fitch said its own capital model remains the main benchmark in assessing insurers’ financial strength. Regulatory tweaks may influence behaviour at the margin, but insurers will still weigh liquidity, risk appetite and portfolio size before reallocating funds.

The proposals also revise how certain stablecoins and other crypto assets are treated.

Fitch expects insurers to remain cautious because crypto assets are volatile and offer limited income.

A proposed 100% stress charge would largely offset any benefit from recognising them in capital calculations. In practice, the impact is likely modest.

Changes to catastrophe risk charges may trim capital needs for global insurers with exposure across several regions.

The revised framework gives more weight to diversification, which could better reflect how risks are spread geographically. Insurers may also be allowed to use their own severe-loss estimates, subject to approval, when policy limits are unclear.

Fitch said indexed universal life products sold to professional investors carry different risks from traditional unit-linked policies.

In unit-linked plans, policyholders bear most of the investment risk. In indexed universal life, insurers have more control over asset management, which affects how capital should be assessed.

Beyond balance sheets, the rule changes are feeding into hiring trends. Recruitment firm Robert Walters Plc said demand is rising for staff with digital and regulatory skills as insurers adapt to the regime.

Hong Kong insurers are projected to see a 36% year-on-year rise in job applications this year, according to the firm’s Global Salary Survey 2026.

Insurance vacancies rose 3% in 2025. Roles tied to digital products, compliance and operations are seeing pay increases.

The hiring push comes as the Hong Kong Insurance Authority reported gross premiums of $55b (HK$423.4b) in the first half of 2025, pointing to steady industry growth even as capital rules evolve.

Questions to ponder:

• How will insurers manage liquidity risks tied to long-dated infrastructure assets
• How will the capital rule changes alter insurers’ hiring plans over the next 12–24 months?