Hong Kong’s insurance watchdog is tightening oversight of the city’s booming premium financing market, as the once-niche lending arrangement spreads to lower-tier insurance buyers, while also reviewing regulations, particularly on how insurers evaluate clients’ affordability, according to Insurance Authority executives.
Premium financing allows policyholders to borrow money from financial institutions to pay upfront premiums on large life insurance policies, which are commonly used as a wealth management tool for high-net-worth clients.
“Some insurers have promoted it too aggressively by lowering threshold requirements and using high leverage to attract middle-class buyers without fully ensuring that buyers fully understand the underlying risks,” said Marty Lui, the Insurance Authority’s executive director of long term business, at a media briefing on Friday.