ComplianceOne Insurance Newsletter – May 2025
The topics discussed in this monthly newsletter are as follows:
2. IA Hosted Conference to Foster Market Understanding on ILS
3. Insurance Agent Sentenced to 51 Months for $1.6M Fraud in Hong Kong
Market News
1. Two Insurers will re-domicile to Hong Kong pursuant to the HKSAR Government's New Company Re-domiciliation Regime
On 14 May 2025, Insurance Authority (“IA”) celebrated the passage of the Companies (Amendment) (No. 2) Bill 2024 (the “Amendment Bill”), a landmark piece of legislation that introduces a framework for overseas companies to re-domicile to Hong Kong. Among Two of the major insurers in Hong Kong, Manulife (International) Limited (“Manulife”) and AXA Hong Kong and Macau (“AXA”) , Manulife and AXA have both announced that they will officially re-domicile from Bermuda to Hong Kong pursuant to the HKSAR government's new company re-domiciliation regime, subject to relevant regulatory approvals.
For more details of the two insurers re-domiciliation announcement, please visit:
Manulife: Re-domiciliation Notice - 6 June 2025
AXA: Re-domiciliation Notice - 23 May 2025
Re-domiciliation process will not affect the Insurer’s legal entity continuity, organizational structure, or daily operations. Therefore, the Insurer’s existing rights and obligations to policyholders, distributors or business partners will remain unchanged, and all current agreements and commitments will continue to be in force.
Details of the Companies (Amendment) (No. 2) Bill 2024 AND 2025
The Companies (Amendment) (No. 2) Ordinance 2025 was gazetted and came into effect on 23 May 2025 (see HKGov Press) the introduction of the re-domiciliation regime is expected to have several positive impacts on Hong Kong’s insurance sector:.
Increased Market Presence: By enabling overseas insurers to establish Hong Kong as their corporate base, the regime is likely to increase the number of insurers operating locally, potentially leading to greater competition and innovation.
Economic Benefits: The relocation of insurers could boost Hong Kong’s economy through job creation, increased tax revenue, and enhanced financial activity within the Greater Bay Area.
Consumer Benefits: A larger pool of insurers may result in more diverse and competitive insurance products, benefiting consumers, including Mainland China visitors who have shown strong demand for Hong Kong’s insurance offerings.
SIGNIFICANCE:
Hong Kong has long been a hub for international finance, bolstered by its strategic location and connectivity within the Guangdong-Hong Kong-Macao Greater Bay Area. According to IA provisional statistics for 2024 - insurance sector has seen significant interest from Mainland China visitors, with new business premiums reaching HK$62.8 billion, marking a 6.5% increase from the previous year.
However, until now, the absence of a re-domiciliation regime has posed challenges for overseas insurers with a strong local presence looking to fully establish Hong Kong as their home base.
The new legislation addresses this gap, aligning Hong Kong with other financial hubs like Singapore, which implemented a similar regime in 2017 (Singapore Re-domiciliation).
2. IA Hosted Conference to Foster Market Understanding on ILS
On 30 May 2025, the IA successfully hosted its second Insurance-linked Securities (“ILS”) Conference, attracting participants from across the globe, including insurance practitioners, institutional investors, and professional service providers. The conference aimed to deepen market understanding of ILS as both an alternative risk transfer tool and an attractive investment product, fostering a robust ecosystem to support its growth.
The ILS Conference featured a comprehensive program designed to engage stakeholders in the evolving ILS landscape.
What is a Captive Insurer?
A captive insurer is a specialized insurance company created by a parent corporation to provide coverage for its own risks. Unlike traditional insurers, captives are designed to meet the unique needs of large businesses, particularly those with operations spanning multiple regions. They enable companies to:
Current Landscape and Developments: This panel explored the evolving ILS ecosystem, highlighting recent advancements and challenges in the field.
Trends and Strategies in ILS Investment: This discussion focused on emerging trends and strategic approaches to ILS as an investment class, offering insights for institutional investors.
By fostering a vibrant ecosystem that includes key players across the ILS value chain, Hong Kong is poised to play a pivotal role in addressing global protection gaps and offering innovative risk management solutions.
SIGNIFICANCE:
According to the IA, ILS are risk management tools allowing insurers and reinsurers to seek alternative capital by offloading insured risks to the capital markets through securitization.According to the IA, ILS are risk management tools innovative financial instruments allowing insurers and reinsurers to seek alternative capital by offloading insured risks (e.g. associated with natural disasters) to the capital markets through securitizationthat enable insurers and reinsurers to transfer risks, such as those associated with natural catastrophes, to capital markets. This mechanism provides alternative capital for risk management while offering investors opportunities for diversification and attractive returns. Hong Kong, with its robust insurance industry and vibrant capital markets, is uniquely positioned to become a leading ILS hub in Asia.
The IA has implemented a bespoke regulatory framework for Special Purpose Insurers (“SPIs”), which are entities specifically formed to issue ILS in Hong Kong. This framework, detailed in Guideline - GL33, ensures a streamlined and efficient process for ILS issuance. Additionally, the Hong Kong government has supported these efforts through the Pilot ILS Grant Scheme, which subsidizes up to 100% of upfront costs for eligible ILS issuances, with a cap of HK$3 million for renewals or repeated issuances. The scheme, extended until 2028 as announced in the 2025-26 Budget, underscores the government’s commitment to fostering a thriving ILS ecosystem.
For more details - please visit the IA website.
Enforcement News
3. Insurance Agent Sentenced to 51 Months for $1.6M Fraud in Hong Kong
On 27 May 2025, the Hong Kong District Court sentenced Yuki FAN Ting-yan (“FAN”), a former financial consultant at AXA China Region Insurance Company Limited, to 51 months in prison for orchestrating a fraud scheme that defrauded the insurer of over $1.6 million in commissions and bonuses. This high-profile case, investigated by the Independent Commission Against Corruption (“ICAC”), underscores the ongoing challenges of insurance fraud in Hong Kong and the importance of maintaining trust and integrity in the industry.
Details of the Fraud
Between November 2014 and September 2016, FAN submitted 12 fraudulent insurance policy applications, falsely claiming that six clients had purchased various insurance products. As a financial consultant at AXA, FAN earned first-year commissions for new policies and renewal commissions for continued policies, along with bonuses for meeting sales targets. The fraudulent applications led AXA to approve the policies and pay out commissions and bonuses totaling over $1.6 million.
However, an ICAC investigation, prompted by a corruption complaint, revealed that the six clients had neither applied for nor paid premiums for these policies. The policies eventually lapsed due to non-payment of subsequent premiums.
Legal Proceedings and Outcome
AN was charged with 12 counts of fraud under section 16A of the Theft Ordinance. Following a trial, she was found guilty on all counts. During sentencing on 27 May 2025, FAN’s refusal to plead guilty meant she received no reduction in her sentence, resulting in a 51-month imprisonment term.
Case Number: DCCC 283/2023
SIGNIFICANCE:
This case underscores the critical need for robust internal controls within insurance companies to prevent fraudulent activities. FAN’s ability to submit false applications over an extended period suggests potential gaps in oversight that allowed the fraud to go undetected until the ICAC’s intervention. Insurance companies are encouraged to strengthen their verification processes and adopt advanced anti-fraud technologies to protect their operations and policyholders.
[End of ComplianceOne Insurance Newsletter – May 2025]
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The Newsletter is for general information purpose only and is not intended to constitute legal or other professional advice.
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