ComplianceOne Insurance Newsletter –
July 2026
The topics discussed in this monthly newsletter are as follows:
Regulatory Updates
Market News
Regulatory Updates
1. IA Imposes Licence Conditions on Two Broker Companies to Ongoing Crackdown on Unlicensed and Improper Referral Activities
On 12 July 2026, Mr. WU, Head of Conduct Supervision of IA, highlighted in an official article that the IA had imposed licensing renewal conditions on two insurance broker companies in early June 2026. The companies were required to suspend acceptance of referral business after failing to effectively control referral activities.
This action forms part of the IA’s broader and ongoing efforts to address improper referral practices. Since 2025, the IA has strengthened supervision of referral arrangements, particularly for participating policies. Key measures include:
Circular issued on 1 Sep 2025, setting a supervisory benchmark whereby referral fees paid by licensed insurance broker companies exceeding 50% of the commission received trigger enhanced disclosure, explanation and closer monitoring (effective October 2025); and
Proactive monitoring, on-site inspections and targeted checks to detect illegal referrals and cross-boundary solicitation involving unlicensed persons, Article issued on 15 Jun 2025.
High referral fees and weak controls have previously been associated with risks of unlicensed individuals performing regulated activities (such as solicitation or advice), potential premium/commission rebates, and cross-boundary selling in breach of regulatory requirements. The IA has consistently emphasised that only licensed insurance intermediaries may carry on regulated activities, and that licensed institutions remain fully accountable for the conduct of their referral arrangements.
SIGNIFICANCE:
The recent imposition of licence conditions on the two broker companies demonstrates that the IA is prepared to use its licensing powers to restrict business models where controls over referrals are inadequate, rather than treating such deficiencies as isolated incidents.
2. IA Issues Interpretation Note on Review Mechanism for Illustration Rate Caps
On 10 July 2026, the Insurance Authority (“IA”) issued a Circular enclosing the Interpretation Note on the Review Mechanism for Illustration Rate Caps in Benefit Illustration for Participating Policies.
Aspect | 28 February 2025 | 10 July 2026 |
Core Content | Sets illustration rate caps (“IR Caps”) of:
on Customers’ IRR for point-of-sale benefit illustrations of participating policies | Does NOT revise or change the IR Cap levels |
Purpose | Establishes minimum expectations to prevent overly aggressive illustrations and support fair treatment of customers | Clarifies the details of the ongoing review mechanism referred to in Section 4 of the 2025 Practice Note |
Effective Date of Caps | 1 July 2025 | Continues to apply (NO change) |
Sources |
In short, the 10 July 2026 Interpretation Note elaborates on the review process only. It does not alter the existing illustration rate caps abovementioned.
SIGNIFICANCE:
The issuance of the Interpretation Note provides transparency on how the IA will conduct ongoing reviews of the illustration rate caps. This effectively enables insurers to plan with greater certainty while ensuring customer protection remains paramount. Insurers should ensure continued adherence to the caps and be prepared for adjustments following future reviews.
Markets News
3. IA Grants Authorizations to HSH Captive and SF Captive Bringing Total Captive Insurers Domiciled in Hong Kong to NINE
On 8 July 2026, the IA announced that it has granted new authorizations to TWO captive insurers:
HSH Captive Limited, established by The Hongkong and Shanghai Hotels, Limited (a locally based luxury hospitality and lifestyle group that owns and manages The Peninsula Hotels (半島酒店) together with other hospitality and commercial properties; and
SF Captive Limited, established by S.F. Holding Co., Ltd., operates a leading global logistics and express delivery service provider, SF Express (順豐速運).
These authorizations raise the total number of captive insurers domiciled in Hong Kong to NINE.
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:
Customize risk coverage tailored to their specific operations.
Enhance efficiency by managing risks internally.
Optimize resources and potentially lower insurance costs.
For multinational enterprises with a wide geographical footprint, captive insurers are a strategic tool to handle diverse and complex risks effectively.
**For more details of Captive Insurer: IA - Regulatory Requirements on Captive Insurers**
SIGNIFICANCE:
Mr Clement CHUENG, Chief Executive Officer of the IA, stated: “Arrival of the two captive insurers bears testimony to the successful execution of our strategy of developing Hong Kong into a leading risk management centre by focusing on local multinational corporations as well as state-owned enterprises and privately-owned enterprises in the Chinese Mainland.” He further noted that “The additional business generated by and different operating models associated with these new market entrants should also prove valuable in nurturing a mature captive ecosystem in Hong Kong.”
These authorizations demonstrate tangible progress in Hong Kong’s strategy to position itself as a leading international risk management centre. By attracting both a prominent local multinational and a major Mainland privately-owned enterprise, the IA is broadening the captive market base, introducing diverse operating models, and strengthening the overall captive ecosystem.
4. Insurance Authority releases provisional statistics for the first quarter of 2026
On 24 July 2026, the IA released provisional statistics for the first quarter of 2026. Total gross premiums of the Hong Kong insurance industry reached $291.6 billion, representing a year-on-year increase of 32.3%.
Long term business recorded new office premiums (excluding Retirement Scheme business) of $141.1 billion (+51.1%), driven primarily by Non-Linked individual business of $135.3 billion (+50.2%), of which participating business accounted for $125.7 billion (+53.7%). Total revenue premiums of in-force business rose to $256.4 billion (+35.6%). Total claims and benefits paid declined slightly to $92.3 billion (-2.1%). As of 31 March 2026, total assets under long term business stood at $5,504 billion.
General business generated total gross premiums of $35.2 billion (+12.5%), with net premiums of $23.1 billion (+12%). Overall operating profit increased to $4.1 billion (+56.1%), supported by a sharp rise in underwriting profit to $2.6 billion (+193.7%). Growth was underpinned by solid direct business performance and a recovery in reinsurance inward underwriting results.
**For more details, a summary is available at the Annex accompanying the IA release.**
SIGNIFICANCE:
The strong expansion in total gross premiums, particularly the robust growth in long term new office premiums and the marked recovery in general business underwriting profitability, demonstrates the continued resilience and momentum of Hong Kong’s insurance market. These results reinforce Hong Kong’s position as a leading international insurance and risk management centre.
[End of ComplianceOne Insurance Newsletter – July 2026]
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