ComplianceOne Insurance Newsletter –

Jun 2026

The topics discussed in this monthly newsletter are as follows: 

Market News

1. IA Warns that Any Attempt to Circumvent Remuneration Rules Via Cross-Border Structures Will Result in Its Timely Intervention

2. IA Hosts AI Cohort Symposium and Welcomes Three New Core Participants

   
   

Regulatory Updates

3. IA Draws Attention to HKMA Circular on Remuneration Structures for Banks

4. IA Shares Key Observations and Best Practices from Recent Onsite Conduct Inspections

Markets News

1. IA Warns that Any Attempt to Circumvent Remuneration Rules Via Cross-Border Structures Will Result in Its Timely Intervention

On 16 June 2026, Chief Executive of Insurance Authority (“IA”) - Mr Clement CHEUNG (張雲正) publicly warned that the IA has observed indications of market participants attempting to circumvent the new remuneration measures through indirect methods. The IA has been closely monitoring the market and will intervene at the appropriate time, with public announcements to follow.

Source:

Bloomberg – Hong Kong Insurance Regulator Vows Crackdown on Rule-Breakers (15 June 2026);

HKEJ – “保監揭行業規避新例 適時介入” (16 June 2026)

To address excessive front-loading of commissions and misaligned intermediary incentives in the participating policy market, the IA has implemented the following measures in quick succession:

Mr Cheung stated that while the IA has not specified the exact evasion methods observed, it will take timely follow-up action where necessary.

Maintaining Compliant Cross-Border Insurance Business

Mr Cheung also addressed market concerns arising from recent China Securities Regulatory Commission (“CSRC”) actions against illegal cross-border securities activities and the potential impact on Hong Kong insurance business involving Mainland visitors. He reaffirmed that the IA will continue to focus on ensuring insurance funds enter Hong Kong through legal and compliant channels, while proactively applying forward-looking monitoring to reduce market disruption risks.

The IA has consistently prioritised cross-border insurance compliance over the years:

SIGNIFICANCE:

The IA’s warning signals that it is actively scrutinising how the new remuneration requirements are being applied in practice and is ready to act where it identifies attempts to bypass them. Insurers and intermediaries should promptly review their commission payment structures, including any overrides, bonuses, and referral arrangements, to ensure they remain aligned with the IA’s expectations under the current framework.

For firms with significant cross-border client activity, the IA’s emphasis on forward-looking monitoring highlights the need for heightened vigilance. Companies are advised to strengthen internal controls, documentation standards, and ongoing monitoring of sales processes involving non-Hong Kong clients. Maintaining clear records and robust oversight in these areas will help demonstrate compliance as the IA continues to focus on this segment of the market.

2. IA Hosts AI Cohort Symposium and Welcomes Three New Core Participants

On the 15 of June 2026, the IA hosted the AI Cohort Symposium and welcomed three new core participants to the programme. This brings the total number of core participants to 10 since the initiative was launched in August 2025. The full list of core participants now comprises:

*Newly Join from June 2026

Core participant status carries defined obligations as set out in the IA’s AI Cohort Annex. Each firm commits to:

• Establishing a Centre of Excellence for AI adoption and innovation in Hong Kong;

• Developing internal AI talent pipelines;

• Contributing to positioning Hong Kong as a regional AI hub;

• Forging a vibrant AI ecosystem;

• Nurturing talents through capability building; and

• Sharing knowledge and experience with brokers and smaller participants.

At the symposium, representatives from core participating insurers shared their achievements and strategic plans in these areas. Chairman of IA - Mr Stephen YIU highlighted two themes he is monitoring closely:

Representatives from Cyberport and the Hong Kong-Shenzhen Innovation and Technology Park highlighted opportunities for cross-sector collaboration. Technology companies also set up booths to introduce their proprietary AI offerings relevant to insurance functions.

**Source: IA Press Releases 15 June 2026

SIGNIFICANCE:

The AI Cohort reaching 10 core participants, including major players demonstrates that responsible AI adoption is rapidly becoming a strategic priority and industry benchmark for leading insurers in Hong Kong. Insurers not yet participating should assess whether their AI governance frameworks, talent development plans and use case selection processes would meet the standards expected of core participants.

Regulatory Updates

3. IA Draws Attention to HKMA Circular on Remuneration Structures for Banks

On 5 June 2026, the IA issued a circular to draw the industry’s attention to the parallel circular issued by the Hong Kong Monetary Authority (“HKMA”) on the same date, titled “Remuneration Structures of Licensed Insurance Intermediaries which are Authorized Institutions for Participating Policies with Regular Payment Terms”.

The HKMA Circular sets out regulatory expectations on commission spreading requirements applicable to authorized institutions (“banks”) acting as licensed insurance intermediaries when selling participating policies with regular payment terms. These expectations are consistent with the fundamental principle that properly prorated remuneration structures help align the interests of intermediaries with those of policyholders and support the delivery of both pre-contract and ongoing services.

The IA circular reminds authorized insurers that they are expected to take into account the requirements in the HKMA Circular when designing remuneration structures for their appointed licensed insurance intermediaries that are authorized institutions. It further states that the IA’s Practice Note on Remuneration Structures of Authorized Insurers for Licensed Insurance Intermediaries for Participating Policies (issued 30 July 2025) and the HKMA Circular together form a comprehensive regulatory framework that should be interpreted and applied holistically.

SIGNIFICANCE:

Authorised insurers should reassess existing remuneration arrangements for bancassurance channels to ensure they are consistent with the IA and HKMA requirements. Firms should also review governance processes, monitoring mechanisms and contractual arrangements with banking partners to demonstrate that remuneration practices support fair customer outcomes and encourage ongoing servicing throughout the duration of participating policies.

4. IA Shares Key Observations and Best Practices from Recent Onsite Conduct Inspections

On 29 May 2026, the Insurance Authority issued a circular to share key observations from its recent onsite conduct inspections of authorized insurers. The circular, addressed to Chief Executives and Key Persons in the Intermediary Management Control Function, aims to highlight positive practices, identify common areas requiring improvement, and recommend measures to strengthen compliance and operational resilience.

The detailed findings are set out in the accompanying Annex, which covers a wide range of areas including corporate governance and culture, recruitment and onboarding of agents and broker companies, training, remuneration structures, financial needs analysis, premium collection, cooling-off and policy delivery, claims handling, gift offerings, orphan policy management, and policy replacement.

The IA emphasises that onsite inspections serve both as a backward-looking verification of compliance and a forward-looking assessment of controls. It encourages insurers to treat the findings constructively, noting that “prevention is always better than cure”.

Summary of the Annex Content:

SIGNIFICANCE:

This circular provides insurers with a valuable consolidated view of the IA’s current supervisory focus following onsite inspections. Firms should treat the Annex as a practical self-assessment tool and review their policies, procedures, and controls against the common findings and recommended best practices outlined.

Particular attention should be given to areas with direct impact on customer outcomes, such as remuneration alignment, financial needs analysis quality, and claims handling efficiency. Insurers that proactively address the gaps highlighted in the report will be better positioned to strengthen their compliance framework and demonstrate a robust culture of fair treatment to the regulator.

[End of ComplianceOne Insurance Newsletter – Jun 2026]

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