HKIA finds firms adhere to new premium financing rule

However, the inspection also identified several areas needing improvement.

The Hong Kong Insurance Authority (HKIA) and the Hong Kong Monetary Authority (HKMA) have completed a joint inspection exercise on premium financing (PF) activities, initiated to assess compliance with supervisory standards effective from 1 January 2023.

The inspection revealed that most authorised insurers and licensed intermediaries are adhering to the standards, with many adopting conservative practices such as stress testing and thorough financial needs analysis.

Some good practices that were seen were:

• “Adopting a more conservative approach to affordability analysis by applying loan stress testing and/or assets haircut; 
• Displaying the leverage ratio in the financial needs analysis (FNA) form and explaining its implication to the customers; and 
• Conducting post-sale calls to PF customers depending on the circumstances, not just to vulnerable customers.”

However, the inspection also identified several areas needing improvement. Issues included unverified customer information, incomplete disclosure forms, and product recommendations made before full financial assessments. 

The regulators urge continued compliance and diligence, especially given the current high-interest rate environment. Detailed findings have been shared with relevant parties for follow-up.