ComplianceOne Insurance Newsletter – August 2025
The topics discussed in this monthly newsletter are as follows:
REGULATORY UPDATES
MARKET NEWS
ENFORCEMENT NEWS
Tahoe Life was fined $10 million for unauthorized transactions
IA Secures Conviction Against YAN Zhiyu for Non-Compliance with Investigation
Regulatory News
1. IA Caps Referral Fees at 50% for Participating Policies, Effective 1 Oct 2025
The IA issued a circular on 1 September 2025, outlining regulatory expectations for referral fees paid by licensed insurance broker companies in relation to participating policies. This guidance applies to authorized insurers and licensed insurance intermediaries dealing with long-term business. It builds on prior communications, including the 22 May 2024 circular on referral business models and the 30 July 2025 Practice Note on remuneration structures.
Key Requirement:
Referral Fees Ratio Cap: Insurance broker companies shall not pay referral fees to any referrers above a Benchmark*, which is calibrated as 50% of the total commission receivable by the broker companies from an authorised insurer for introducing, arranging and servicing a participating policy
Scope of Circular: The new regulatory expectation will not be applied to the business lines which regulators are SFC and MPFA
Effective Date: All licensed insurance broker companies and authorized insurers should comply with this circular by 1 October 2025.
*As stated in the circular on 1 September 2025, the Benchmark is calibrated as 50% of the total commission receivable by a licensed insurance broker company from an authorized insurer for introducing, arranging and servicing a participating policy.
SIGNIFICANCE:
This circular address concerns over business models that may incentivize misconduct, such as shifting regulated activities to unlicensed referrers or offering indirect rebates. By establishing a clear benchmark and requiring justifications for deviations, the IA aims to promote fair treatment of customers, enhance market integrity, and sustain the long-term health of Hong Kong's insurance sector amid evolving distribution practices.
2. Insurers Must Publicly Disclose Audited Financials Under RBC Regime to Boost Market Transparency Under The New Requirement
On 8 August 2025, the IA issued a circular to the Chief Executives of all authorized insurers (excluding intermediaries), detailing public disclosure requirements under IO for the first financial year adopting the Risk-based Capital (“RBC”) regime (financial years commencing on or after 1 January 2024). This initiative aims to enhance market transparency ahead of the full enactment of the Insurance (Public Disclosure) Rules in 2026.
The IA conducted a public consultation on the draft Insurance (Public Disclosure) Rules on 14 March 2025, with conclusions issued on 8 August 2025.
While the full Disclosure Rules are planned for introduction to the Legislative Council and effective in 2026, insurers are required to disclose quantitative information for the transitional year.
Audited Financial Statements
All authorized insurers, excluding those with approved transitional arrangements under rule 88 of the Insurance (Valuation and Capital) Rules, marine insurers, captive insurers, or special purpose insurers (collectively "exempted insurers"), must publish their audited financial statements. These are the statements submitted to the IA under rule 3 of the Insurance (Submission of Statements, Reports and Information) Rules, disclosed in their original language without translation.
Disclosure Statement
All authorized insurers except exempted insurers and Lloyd’s must publish a disclosure statement using the standard templates in Annex 1 (English) and Annex 2 (Chinese). The statement must be provided in English with a Chinese translation or vice versa.
Focus on quantitative information; qualitative information is optional if deemed necessary.
Disclosures must conform to the valuation and capital requirements under the Insurance (Valuation and Capital) Rules, or any variations/relaxations under sections 10(3) or 130(1) of the IO.
Include a statement (referring to section 5 of the disclosure statement) made by a controller (as defined in section 13A(12) of the IO) or a director, on either the English or Chinese version.
SIGNIFICANCE:
This circular promotes early transparency in the insurance sector under the new RBC regime, enabling stakeholders to assess insurers' financial positions. By mandating public disclosures, the IA fosters greater market integrity, accountability, and confidence in Hong Kong's insurance industry as it transitions to risk-based supervision.
Market News
3. Insurance Authority Encourages Relocation of Investment Decision Functions for Life Insurers to Hong Kong
According to reports from Bloomberg dated 5 August 2025, the IA has been actively encouraging major life insurance companies, such as AIA Group Limited (1299.HK) (友邦保險控股有限公司), to relocate their investment decision-making functions from Singapore back to Hong Kong. This initiative, which reportedly began in early 2024, aims to address emerging challenges in the competitive landscape between the two financial hubs.
Regulatory Oversight
Under the IA's Guideline on Outsourcing (GL14), the IA can monitor outsourcing arrangements, including detailed agreements with delegated investment managers, such as amounts and locations involved. In at least one instance, the IA has scrutinized whether Hong Kong-based teams retain final decision-making authority over delegated mandates.
Objectives
The push is intended to foster greater employment opportunities in Hong Kong across insurers, fund managers, and legal firms, while ensuring prudent asset management to mitigate excessive concentrations in risk types, counterparties, and investment tools.
The launch event featured engaging discussions among executives from regulators, tech giants, and telecom providers on emerging scam trends and joint strategies to protect the public.
SIGNIFICANCE:
An IA spokesperson commented: “Currently, there is no statutory requirement for life insurers to maintain assets or make investment decisions in Hong Kong. However, all authorized insurers should prudently manage their assets to avoid excessive concentration in risk types, counterparties, and investment instruments. This is crucial to ensure that insurers can promptly meet claims and fulfill contractual obligations, thereby protecting policyholders’ interests. Additionally, in line with international best practices, the IA will appropriately consider potential legal and operational restrictions on capital transfers between jurisdictions when conducting resolution and recovery planning for individual authorized insurers.”
This development highlights the IA’s commitment to enhancing Hong Kong’s position as a leading financial center by promoting local decision-making and job creation in the insurance sector. By encouraging the repatriation of key functions, the IA seeks to bolster market resilience, reduce dependency on external jurisdictions, and align with global regulatory standards for risk management and policyholder protection.
Enforcement News
4. Tahoe Life was fined $10 million for unauthorized transactions
On 2 September 2025, the IA issued a public reprimand to Tahoe Life Insurance Company Limited (泰禾人壽保險有限公司) (“Tahoe Life”) and imposed a fine of $10 million, to be borne by its shareholders’ fund.
Key Details:
Background of Tahoe Group | The Tahoe Group was a high-profile, Fujian-based real estate conglomerate founded by Mr. Huang Qisen (黄其森先生) (also the former director of Tahoe Life). It specialized in developing luxury residential properties, often with a traditional Chinese architectural theme, known as "Courtyard" series. The company's downfall began around 2017-2018 as the Chinese government implemented stricter policies to curb corporate debt and speculation in the property sector ("Three Red Lines" policy). This made refinancing existing debt extremely difficult. |
Current Tahoe Life | Tahoe Life is currently under the direct control of government-appointed Managers due to a severe failure in corporate governance and regulatory compliance. |
Disciplinary Actions | The IA's actions stem from related party transactions conducted by Tahoe Life between July 2019 and April 2020 without prior IA consent. These transactions involved Tahoe Group Global (Co.) Limited. The IA determined that Mr. Huang Qisen and Mr. Ge Yong (葛勇先生), directors of Tahoe Life at the time, are no longer considered fit and proper persons. Both individuals have since stepped down from their key management roles. |
Appointment of Managers | On 26 July 2024, the IA invoked Section 35(2)(b) of the Insurance Ordinance (Cap. 41) to appoint Mr. Derek Lai, Mr. Forrest Kam of Deloitte Touche Tohmatsu, and Mr. Oliver Cheng of Deloitte Advisory (Hong Kong) Ltd as Joint and Several Managers to take full control of Tahoe Life’s affairs, business, and property. This followed the appointment of Advisors in August 2023 under Section 35(2)(a) to provide recommendations, which Tahoe Life failed to act upon, including not submitting audited financial statements for 2022 and 2023, failing to secure new strategic investors, and not improving corporate governance. For more details, please refer to press release issued by the IA on 16 August 2023 . |
Supervisory Measures | To protect policyholders, the IA has implemented several measures, including:
These measures, combined with the appointment of Managers, aim to ascertain Tahoe Life’s financial and solvency position, preserve capital resources, and identify recovery solutions in the best interest of policyholders. |
Impact on Policyholders | The IA assures that all policies issued by Tahoe Life remain unaffected. The Managers are responsible for maintaining full business operations, including customer service, premium payments, and claims settlement. Policyholders are advised to carefully assess their circumstances and avoid hasty decisions, as life insurance products are designed for long-term maturity. |
SIGNIFICANCE:
The IA’s actions underscore its commitment to ensuring robust governance and compliance within the insurance industry. By addressing unauthorized related party transactions and enforcing stringent supervisory measures, the IA aims to safeguard policyholder interests, uphold market integrity, and reinforce trust in Hong Kong’s insurance sector.
5. IA Secures Conviction Against YAN Zhiyu for Non-Compliance with Investigation
On 3 September 2025, the Eastern Magistrates' Courts convicted Mr. YAN Zhiyu (顏志裕先生) and imposed a fine of $10,000 for failing to attend an investigation interview without reasonable excuse. This interview was related to an investigation into the suspected misappropriation of premium payments belonging to two policyholders, constituting a breach of section 64ZZL(1) of the Insurance Ordinance (Cap. 41) (“IO”).
Conviction and Penalty
Mr. YAN Zhiyu was found guilty of non-compliance with the requirement to attend an interview as part of the IA’s investigation. The court imposed a fine of $10,000 for this violation.
Legal Obligations
Under section 64ZZL(1) of the IO, individuals may be required to attend interviews or provide assistance to support the IA’s regulatory oversight of insurance intermediaries. Failure to comply without reasonable excuse can lead to severe penalties:
· On indictment: A fine of up to $200,000 and imprisonment for up to 1 year.
· On summary conviction: A fine of up to $50,000 (level 5) and imprisonment for up to 6 months.
SIGNIFICANCE:
This conviction underscores the IA’s commitment to enforcing compliance with its regulatory processes. By holding individuals accountable for failing to cooperate with investigations, the IA aims to protect policyholders, ensure the integrity of insurance intermediaries, and maintain trust in Hong Kong’s insurance sector. The case highlights the importance of adhering to statutory obligations to facilitate effective regulation and safeguard consumer interests.
[End of ComplianceOne Insurance Newsletter – August 2025]
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