Hong Kong financial regulators to define premium financing standards
They plan to brief the industry and relevant stakeholders about the standards.
The Hong Kong Monetary Authority (HKMA) and the Insurance Authority (IA) will engage the industry and relevant stakeholders to clarify the standards expected on long term insurers and licensed insurance intermediaries carrying out premium financing activities, the two financial regulators said in a joint statement.
The statement was released following a joint inspection exercise in the second half of 2020 to identify current industry practices and areas requiring improvement.
The joint inspection covered authorized insurers carrying on long term insurance and licensed insurance intermediaries, including banks, carrying on regulated activities in long term insurance in Hong Kong.
Part of the areas the inspection covered was a suitability and affordability assessment, distribution and selling process, disclosure of risks and other important matters, and processing of policy services such as assignment and maturity.
“Premium financing involves leveraged borrowing and exposure to the risk of interest rate hikes, with low or even negative returns being a distinct possibility when non-guaranteed benefits produced by insurance policies fall short of expectations. The interest of policyholders has to be adequately protected,” said Clement Cheung, CEO of the IA.