ComplianceOne Insurance Newsletter – October 2025

The topics discussed in this monthly newsletter are as follows: 

REGULATORY UPDATES

1. PIBA Urges Compliance with IA's Referral Fee Guidelines for Participating Policies and Warns Against High-Risk Practices

MARKET NEWS

2. IA Introduces Framework for Domestic Systemically Important Insurers (D-SIIs)

3. JD.com (京東集團) Obtains Insurance Brokerage License in Hong Kong

ENFORCEMENT NEWS

4. ICAC Charges Six Individuals, Including Police Officers, in HK$3 Million Insurance Fraud Scheme

5. IA imposed 30-year ban on WONG Ka Keung for conspiring to defraud HK$27 million

Regulatory News

1. PIBA Urges Compliance with IA's Referral Fee Guidelines for Participating Policies and Warns Against High-Risk Practices

On 13 October 2025, the Professional Insurance Brokers Association (“PIBA”) issued the Memo, regarding to the IA circular dated 1 September 2025, which sets out regulatory expectations for referral fees paid by licensed insurance broker companies on participating policies (those involving profit-sharing).

For more detail, please refer to the Memo: PIBA Circulars - IA's regulatory expectation on referral fees   

Summary of the IA circular

Effective from 1 October 2025, all licensed brokers and insurers must fully comply with these rules, which include a 50% benchmark limit on fees to unlicensed referrers to prevent excessive payments and promote fair practices.

For more detail, please refer to ComplianceOne Insurance Newsletter – August 2025 (Topic 1)

Summary of the PIBA Memo

PIBA, having engaged closely with the IA during the guideline development, stressed the need for immediate action: reviewing and revising existing referral contracts to ensure alignment, confirming all arrangements (new or ongoing) meet the expectations, and establishing strong internal controls to avoid non-compliance. The IA has already contacted several broker companies and their Responsible Officers (“RO”) in September 2025 to emphasize adherence, indicating potential for stricter enforcement if violations occur.

To enhance oversight, the IA plans to issue questionnaires on referral details, conduct on-site and off-site inspections for high-risk cases, scrutinize referral arrangements during license renewals, and apply similar reviews to insurers' due diligence processes.

Focus areas include unusual financial statement items like

• Business Expenses;

• Large Marketing or Administrative Costs;

• Rapid Growth in Broker Volumes Reported by Insurers; and

• Market Intelligence from Complaints.

High-Risk Practices

The memo also includes an annex outlining high-risk practices to evade the rules, which PIBA strongly advises against due to their legal and regulatory risks. These include:

SIGNIFICANCE:

This comprehensive guidance from PIBA reinforces the IA's push for ethical referral frameworks, reducing risks of misconduct and supporting sustainable industry growth. By consolidating reminders on compliance, upcoming regulatory actions, and avoidance of evasion tactics, it equips brokers to prioritize professional standards, enhance transparency, and protect policyholders, ultimately bolstering trust in Hong Kong's insurance sector amid evolving market dynamics.

Market News

2. IA Introduces Framework for Domestic Systemically Important Insurers (D-SIIs)

On 17 October 2025, the IA announced the implementation of a new framework for classifying Domestic Systemically Important Insurers (“D-SIIs”). This macroprudential approach identifies insurers whose potential failure could significantly disrupt Hong Kong's local financial system, necessitating enhanced supervisory measures. The IA will recommend to the Financial Secretary that all D-SIIs be included under the Financial Institutions (Resolution) Ordinance (“Cap. 628”) to enable comprehensive resolvability assessments and resolution planning.

The list of Insurers classified as D-SIIs

Under this framework, AIA Group Limited (“AIA”) and Prudential Corporation Asia Limited (“Prudential”) have been designated as D-SIIs. Both entities are recognized as Internationally Active Insurance Groups (“IAIGs”), complying with stringent standards within the IA's group-wide supervision framework. Annual assessments will be conducted to review and update classifications, aligning with international best practices.

The following table summarizes the classified D-SIIs (Last update 17 Oct 2025):

The list shall be updated by the IA when needed, for the latest version, please visit: Domestic Systemically Important Insurers

What is a D-SII?

D-SIIs are insurers whose failure could cause significant disruption to Hong Kong's financial system due to their size, market importance, and interconnectedness. The IA's D-SII framework uses a two-step assessment process:

1. Quantitative (evaluating size, substitutability, interconnectedness, and liquidity); and

2. Qualitative (considering additional risks and mitigating factors).

Designated D-SIIs face enhanced supervision, including resolution planning under the Cap. 628 and integration with frameworks like the IAIS Holistic Framework for systemic risk management.

SIGNIFICANCE:

This framework enhances financial stability by proactively addressing systemic risks in the insurance sector, ensuring that critical insurers are resilient and resolvable without widespread economic fallout. By designating AIA and Prudential as D-SIIs, the IA reinforces Hong Kong's alignment with global regulatory standards, such as those from the International Association of Insurance Supervisors. Insurers and stakeholders should prepare for heightened oversight, which promotes long-term market integrity and policyholder protection.

3. JD.com (京東集團) Obtains Insurance Brokerage License in Hong Kong

On 23 October 2025, JD.com (京東集團) Hong Kong subsidiary - Jingdong Insurance Consultants (Hong Kong) Limited, was granted an insurance brokerage license by the IA in Hong Kong.

Spotlight on the Climate Modelling Project

For more details, please refer to Register of Licensed Insurance Intermediaries

The license, which remains valid until October 2028, positions JD.com to expand into the local insurance market by offering brokerage services. The responsible officer for the licensed entity is LAM Che Chuen, a seasoned professional in the sector. This development follows reports of JD.com actively recruiting insurance personnel with relevant licenses and experience in Hong Kong's insurance industry, signalling a strategic push to build a local team.

SIGNIFICANCE:

JD.com, a major Chinese e-commerce giant with a market value of approximately US$52 billion, is leveraging this license to tap into Hong Kong's robust insurance landscape, which has seen significant growth from Mainland Chinese visitors contributing HK$62.8 billion in new business premiums in 2024. The move aligns with broader efforts by tech firms to integrate financial services, including insurance, into their platforms.

JD.com's entry into Hong Kong's insurance brokerage market enhances competition and innovation, potentially offering digital-first solutions to consumers amid rising demand from cross-border clients. This could drive product diversification and efficiency but also underscores the need for rigorous regulatory oversight to ensure compliance and protect policyholders. Licensed intermediaries and insurers should monitor such expansions for partnership opportunities while reinforcing internal controls against emerging risks in tech-integrated financial services.

Enforcement News

4. ICAC Charges Six Individuals, Including Police Officers, in HK$3 Million Insurance Fraud Scheme

On 8 October 2025, the Independent Commission Against Corruption (“ICAC”) charged LAM Hin Ho (林顯豪) (“LAM”), a 36-year-old police sergeant, along with five others, in connection with a fraud scheme that allegedly defrauded two insurance companies:

• Sun Life Hong Kong (香港永明金融) (“Sun Life”); and

• China Taiping Life Insurance (Hong Kong) (中國太平人壽保險(香港) (“China Taiping”))

The fraud scheme with approximately HK$3 million in commissions, bonuses, and allowances. The scheme involved recruiting dummy insurance agents and policyholders to submit 20 fraudulent policy applications between December 2016 and June 2024.

The following table outlines the key timeline of events based on official ICAC disclosures:

LAM faces 21 charges: 20 counts of fraud under Section 16A of the Theft Ordinance and one count of conspiracy to make false instruments. He allegedly conspired with an insurance company mid-level manager (who remains at large) to recruit family members, friends, and police colleagues as dummy insurance agents. False representations were made to induce the insurers to underwrite the policies and release payments totalling around HK$1 million from Sun Life and HK$2 million from China Taiping. Additionally, LAM is accused of arranging falsified academic credentials for one co-defendant to join China Taiping to facilitate the scheme.

A recent ICAC update on 6 November 2025 confirmed the ongoing proceedings against the six charged individuals, with two additional suspects—a former mid-level manager at the involved insurers and another individual—implicated but currently at large. Arrest warrants have been issued for these fugitives. The defendants were granted bail and appeared in Eastern Magistrates' Court on 9 October 2025, with the case transferred to the District Court for further handling.

SIGNIFICANCE:

This case highlights the persistent risks of insurance fraud through manipulated agency structures and falsified documents, which undermine industry integrity and policyholder trust. It underscores the need for insurers to enhance due diligence in agent recruitment, policy verification, and commission disbursement processes. Regulatory bodies like the ICAC and Insurance Authority continue to prioritize enforcement to deter such schemes, reinforcing Hong Kong's reputation as a transparent financial hub. Insurers are advised to review internal controls and collaborate with authorities to mitigate similar vulnerabilities.

5. IA imposed 30-year ban on WONG Ka Keung for conspiring to defraud HK$27 million

On 3 November 2025, the IA imposed a 30-year ban on Mr. WONG Ka Keung (王家強) (“WONG”) (Licence number: IE9049), prohibiting him from acting as an insurance intermediary. This disciplinary action stems from his involvement in a large-scale fraud scheme where he conspired with at least nine other individuals to defraud his appointed authorized insurer of approximately HK$27 million over a three-year period.

Reasons for the Ban Imposed

WONG arranged for patients suffering from critical illnesses to impersonate policyholders and submit false claims, personally profiting around HK$13.5 million. He also forged three sick leave certificates for one patient to support the deception, including forged medical records for a pair of sisters to fraudulently obtain insurance payouts and extend sick leave.

Details of the Case - HCCC 182/23:

WONG was charged by the Independent Commission Against Corruption (“ICAC”). High Court Judge described WONG as the mastermind, noting that his critical role as an insurance agent constituted a severe breach of fiduciary duty. The judge highlighted that the fraud could have continued indefinitely if undetected, causing ongoing harm to AIA Group Limited (友邦保險香港). As a result, he was sentenced to six years and four months in prison.

The IA highlighted that such misconduct constitutes a criminal offense, disrupts market operations, and undermines the legitimate interests of policyholders. The lengthy ban underscores the gravity of the violations.

SIGNIFICANCE:

This case exemplifies the IA's zero-tolerance approach to fraudulent activities within the insurance sector, reinforcing regulatory enforcement to maintain market integrity and protect policyholders. By imposing one of the longest bans on record, the IA sends a clear deterrent message to intermediaries, emphasizing the severe consequences of criminal involvement in false claims. This action supports broader efforts to enhance trust in Hong Kong's insurance industry, particularly amid rising concerns over misconduct, and aligns with ongoing initiatives to strengthen compliance and ethical standards.

[End of ComplianceOne Insurance Newsletter – October 2025]

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