HKMA Guidance on Use of Premium Financing for Long Term Insurance Policies

Our ref: B1/15C
C2/5C
1 April 2022
The Chief Executive
All Authorized Institutions
Dear Sir / Madam,
Use of Premium Financing to take out Long Term Insurance Policies I am writing to draw your attention to the attached “Circular on the supervisory standards and key requirements on the use of premium financing to take out long term insurance policies” issued by the Insurance Authority (“IA”) today (“IA Circular”). The IA Circular, among other things, clarifies the supervisory standards and key requirements in the existing codes of conduct and guidelines for licensed insurance intermediaries when carrying on regulated activities under the Insurance Ordinance (Cap. 41) with respect to the use of premium financing, and introduces an “Important Facts Statement – Premium Financing” to enhance the disclosure on premium financing to customers. In light of the unique banking environment and the role as a lender that authorized institutions (“AIs”) and their subsidiaries may play in premium financing activities, the Hong Kong Monetary Authority (“HKMA”), having discussed with the IA and consulted the industry, hereby provides further guidance in the Annex to AIs in complying with the IA Circular as a licensed insurance intermediary, and when acting as a premium financing facility provider. Alongside the requirements on the suitability assessment and risk disclosure on the part of licensed insurance intermediary, the guidance covers the aspects on cooling-off right and protection against risk of over-leveraging when AIs and their subsidiaries act as premium financing facility providers. In that capacity, AIs and their subsidiaries should be mindful of the cooling-off right of the customer under the insurance policy, and should also implement customer protection measure against risk of over-leveraging in their credit assessment.

AIs (and their subsidiaries as appropriate) should review and make necessary enhancements to their policies, procedures, controls and monitoring relating to premium financing activities, and provide sufficient training to their staff to ensure compliance with the standards and requirements set out in the IA Circular and the Annex by 1 January 2023. If you have any question on this circular, please contact Ms Candy Tam at 2878-1292 or Mr Chris Wong at 2878-1450. Yours faithfully, Alan Au Executive Director (Banking Conduct) Encl. c.c. Insurance Authority (Attn: Ms Carol Hui, Executive Director (Long Term Business) Mr Peter Gregoire, Head of Market Conduct and General Counsel)

Annex
Supervisory Standards and Key Requirements on the Use of Premium Financing to take out Long Term Insurance Policies Suitability assessment Regardless of whether premium financing will be used, AIs have been required to ensure that the insurance policy recommended to the customer is suitable to the customer’s circumstances including needs and resources. In this connection, AIs are reminded to ensure that the insurance policy is suitable to the customer’s needs and objectives, including but not limited to the amount of life protection need as evaluated in the financial needs analysis, and is affordable to the customer. To assess the affordability of the customer in respect of using premium financing, AIs should take into account available information and comply with paragraph 2 of the IA Circular, including the requirement on explaining such affordability assessment. For AIs that act in the dual capacity as the licensed insurance intermediary and as the proposed premium financing facility provider, they are expected to have access to the relevant information of the premium financing facility and therefore the alternative arrangements in paragraph 3 of the IA Circular would not be applicable to them. These AIs should take into account the use of premium financing in the affordability assessment prior to the application for premium financing. As stipulated in paragraph 8 of the IA Circular, as part of the assessment, AIs should, among other things, assess whether the customer using premium financing faces a risk of over-leveraging, and should not recommend a policy that would amount to risk of over-leveraging unless there is sufficient justification. The justification should be clearly explained to the customer and documented as part of the reasons for recommendation of the policy. Risk disclosure For AIs that act in the dual capacity as the licensed insurance intermediary and as the proposed premium financing facility provider, they should sufficiently and appropriately disclose and explain to the customer the key features and risks of the premium financing facilities, including the “Important Facts Statement – Premium Financing” and where applicable, other relevant terms and conditions, risks and features that may be involved with the use of premium financing, prior to the application for premium financing.

Cooling-off right
AIs that offer premium financing should treat customers fairly in handling customer’s cooling-off request and be mindful of imposing any conditions and/or costs (e.g. early repayment fee of the premium financing facility) on the customer before the expiry of the cooling-off period which may deter the customer from exercising the cooling-off right. They should also ensure that the returning of any net proceeds (after netting of the outstanding amount and the interest of the premium financing facility) is processed promptly. For the avoidance of doubt, this requirement is applicable to AIs and their subsidiaries that act in the capacity as a premium financing facility provider. Protection against risk of over-leveraging Paragraph 24.1 of the Code of Banking Practice stipulates that credit assessment of AIs should take into account the customer’s ability to repay. In this connection and as a customer protection measure against risk of over-leveraging, AIs should take into consideration, among other things, whether the ratio of the loan amount of the premium financing facility to the customer’s existing own financial resources is within a reasonable level in their credit assessment for cases where a risk of over-leveraging exists. AIs should also ensure that such ratio is disclosed to the customer before the customer accepts the premium financing facility offer. For the avoidance of doubt, this requirement is applicable to AIs and their subsidiaries that act in the capacity as a premium financing facility provider.

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/…..
1 April 2022 Our Ref: INS/TEC/9/2/2/26
To: Chief Executives of authorized insurers carrying on long term business and responsible officers of licensed insurance broker companies and licensed insurance agencies carrying on regulated activities in relation to long term business Dear Sirs, Circular on the supervisory standards and key requirements on the use of premium financing1 to take out long term insurance policies In view of the growing popularity of the use of premium financing to fund premium payment when taking out long term insurance policies in the market, the Insurance Authority (following discussions with the Hong Kong Monetary Authority) issues this circular to clarify the supervisory standards and key requirements in the existing codes of conduct and guidelines, for authorized long term insurers (“insurers”) and licensed insurance intermediaries (“insurance intermediaries”) when carrying out their insurance operations and regulated activities with respect to the use of premium financing by (potential) policy holders (“customers”). Affordability assessment in respect of premium financing

1. As required under Paragraph 6.11 of GL30, the source of funds of the customer must
   be duly considered to ensure that the customer can afford the recommended product(s). Insurers and insurance intermediaries should therefore take reasonable steps to ascertain whether the customer2 is purchasing the life insurance policy using premium financing3 . They should for example, make sufficient enquiries to the customer to find out whether the customer is funding or intends to fund the purchase of the policy using premium financing.
2. If the customer has indicated that premium financing is intended to be used, Paragraph
   6.11 of GL30 stipulates that the insurance intermediary must take that into account
   when assessing the customer’s ability and willingness to pay insurance premiums. This 1 For the purpose of this circular, “premium financing” is defined as an insurance funding arrangement whereby the customer, borrows funds from the lender (usually a financial institution) to pay for the premiums of the life insurance policy and, in doing so, assigns all or part of his/her rights under the proposed policy to the lender. 2 The term “customer” in this circular includes individual and corporate customers. If an insurer or insurance intermediary considers that certain standards or requirements may not be applicable in their circumstances for corporate customers, they should contact the IA for clarification. 3 For the avoidance of doubt, the requirements as contained in this circular apply to every application for a new life insurance policy to be acquired using premium financing. These requirements do not apply to policies which have been issued with premiums already fully paid by the customers using their own funds, but are subsequently assigned by the customers as collateral for loan facility.

assessment (which should be explained to the customer) must at a minimum, ascertain whether the customer has sufficient financial resources to – (a) pay at the outset the portion of the premium not financed by the premium financing facility4 ; (b) meet all scheduled repayments (including principal and interest repayments) over the entire tenure5 of premium financing facility; and (c) repay the sum owed under the premium financing facility if demanded by the lender before maturity of the policy.
3. To comply with the above requirement, insurance intermediaries without access to the
information regarding the premium financing facility should ask for and obtain such information from the customer. If the customer refuses to disclose such information, the insurance intermediary should perform the affordability assessment as if the customer is not acquiring the proposed policy using premium financing (i.e. the total premium is to be funded entirely by the customer’s own funds). The insurance intermediary must also explain to the customer that, without the information, it would not be able to assess the customer’s suitability and affordability of acquiring the proposed policy using premium financing pursuant to the Standard and Practice 6.1(b)(iv) of the Code of Conduct for Licensed Insurance Agents and Code of Conduct for Licensed Insurance Brokers (collectively referred to as “Code of Conduct”). An acknowledgement of the above should be obtained from the customer. Please refer to Important Facts Statement – Premium Financing (“IFS-PF”) in Annex for more details.
4. For the avoidance of doubt, the alternative arrangement stipulated in Paragraph 3 above
is applicable only if the customer refuses to disclose such information and cannot be adopted in lieu of the assessment as stipulated in Paragraph 2. The alternative arrangement is also not applicable to any insurance intermediaries with access to the information regarding the premium financing facility. For example, a bank acting in the dual capacity as the insurance intermediary and as the proposed premium financing facility provider is expected to provide the relevant details to its licensed technical representatives for the purpose of conducting suitability and affordability assessment for the customers.
5. As required under Paragraph 6.10 of GL30, an insurer should have internal controls for
identifying the accumulation of multiple policies it has in force for the same customer. It should also check whether any of these in force policies has been assigned or pledged by the customer as collateral for a loan facility, and must take this information into account in the underwriting process. Likewise, insurance intermediaries with access to similar information of the customer, are expected to take the relevant information into account when carrying on regulated activities. 4 For the purpose of this circular, the terms “premium financing facility” and “loan facility” are used interchangeably. In circumstances where the premium financing facility tenor is not fixed (e.g. an overdraft facility which can be withdrawn and repaid at any time), the insurance intermediary should take a prudent approach in the affordability assessment by assuming that the premium financing facility would last throughout the entire policy term of the proposed policy.

6. A holistic approach should be adopted in assessing customers’ affordability for the
   purpose of GL30. The FNA should explicitly ascertain whether the customer has any outstanding liabilities and whether his/her existing insurance policies are used as collateral for premium financing facilities or otherwise pledged or assigned as collateral for a loan facility. Insurers and insurance intermediaries must take such matters into account.
7. As stipulated under the General Principle 6 of the Code of Conduct, an insurance
   intermediary’s regulated advice (i.e. giving an opinion in relation to a matter specified in the Part 3 of Schedule 1A to the Insurance Ordinance (Cap 41)) should be suitable for the customer taking into account the customer’s circumstances. Insurance intermediaries should therefore restrain from giving regulated advice recommending the use of premium financing, unless sufficient information in relation to the customer’s circumstances (including details of the proposed premium financing facility) is obtained and an appropriate suitability assessment and affordability assessment has been carried out. Additional measures for customers with risk of over-leveraging
8. As part of the suitability and affordability assessment, the insurance intermediaries
   should also assess whether customers using premium financing face a risk of over￾leveraging, and if so, take that into account for the purpose of GL30. The risk of over￾leveraging exists when loan repayment requested by the lender before maturity of the policy cannot be fully met by the customer’s own funds and can only be met using surrender value of the proposed policy6. The insurance intermediaries should not recommend a policy that would amount to risk of over-leveraging unless there is sufficient justification7 . The justification should be clearly explained to the customer and documented as part of the reasons for recommendation of the policy.
9. As required under Paragraph 7.7 (b) of GL16, insurers should endeavor to reduce the
   risk of sales that do not meet the needs of customers by assessing the suitability and affordability of products for customers during the underwriting process based on available information. Insurers should therefore establish and maintain an effective underwriting process that safeguards customers against over-leveraging by the use of premium financing.
10. Insurers’ underwriting process should assess whether customers using premium
    financing face a risk of over-leveraging and should in addition perform asset / income proof verifications on these customers, to reasonably ascertain if these customers have the level of assets/income disclosed and do not have any undisclosed liabilities 6 In other words, the requirements stipulated under the “Additional measures for customers with risk of over-leveraging” are not applicable if the customer has own funds available to pay the policy in full without the use of the premium financing facility. 7 Insurance intermediaries should consider factors relevant to a particular circumstance in the justification and clearly explain them to the customers, for example, by disclosing the ratio of the loan amount of the premium financing facility to the customer’s existing own financial resources to facilitate the understanding of the customers and increase their awareness to the risk of over-leveraging.

attached8
, which may further impact his/her ability to meet any payments arising from the premium financing facility prior to policy issuance. In any event, if there is any doubt about the customer’s affordability, insurers should take a prudent approach (e.g. rejection of applications from these customers) to protect the interest of policyholders.
11. When performing the asset proof verification, insurers should take into account the
condition / state of the assets and apply reasonable haircut where appropriate. For example, for assets that are not solely owned by the customer, their value should be adjusted to reflect the customer’s portion of ownership; for assets with outstanding liabilities, their value should be adjusted to the net value. Normally, insurers should not accept any owner’s occupied properties as asset proof. Disclosure
12. With reference to Paragraph 6.8 of GL16 and to provide practical guidance to facilitate
insurance intermediaries in complying with the requirement to provide customers with accurate and adequate information to make informed decisions as stipulated under General Principle 5 of the Code of Conduct, the IFS-PF in Annex has been developed with a view to promoting adequate disclosure related to premium financing across the industry and to ensure full understanding of the relevant risks and features by customers so they can make informed decisions.
13. The IFS-PF should be completed9 for every new insurance policy application where the
customer intends to use premium financing. Insurance intermediaries are required to fully explain the contents of the IFS-PF to customers, as soon as they are made aware of the customers’ interest in the use of premium financing. In any event, the IFS-PF must be duly completed, signed and dated by the customer prior to policy issuance. Insurers and insurance intermediaries are reminded to observe and comply with the requirements appended to the IFS-PF in Annex.
14. The IFS-PF is not intended to serve as an exhaustive list of risks and features of
acquiring a life insurance policy with the use of premium financing. Insurance intermediaries should take into account the particular circumstances of the customers and fully explain other relevant terms and conditions, risks and features that may be involved with the use of premium financing. Sales practice, training and other aspects
15. Insurers are reminded to adhere to the principle of “fair treatment of customers” when
designing products and underwriting insurance policies. In doing so, insurers are required to take a holistic view of all relevant factors when carrying out the diligent review in the product design stage, as required under Paragraphs 5.1 and 5.2 of GL16. 8 For example, an insurer may screen the bank statements submitted by the customer (generally used to verify the bank balance and income level of the customer) for any bank overdraft or an outstanding personal loan, which may not be fully disclosed in the FNA form. 9 For the avoidance of doubt, the insurance intermediary is required to explain the content of the IFS-PF for all applications involving premium financing, even if the customer is not willing to disclose any details of loan facility.

Similarly, insurance intermediaries are reminded to apply the same principle in their product due diligence process, where applicable.
16. As required under General Principles 2, 5 and 6 of the Code of Conduct, insurance
intermediaries are expected to treat the customers fairly, provide accurate and adequate information to enable customers to make informed decisions, and provide regulated advice that is suitable for the customer taking into account the customer’s circumstances. Insurance intermediaries should, as soon as they become aware that the policy to be purchased is being funded by a premium financing facility, take into account the customer’s proposed use of premium financing facility in their carrying on of regulated activities. If the policy benefits will be used to repay the loan, the insurance intermediary should remind the customer of the potential shortfall that the benefits receivable under the proposed policy financed by premium financing will be less than the amount indicated in the relevant Benefit Illustration.
17. When advertising, marketing or promoting an insurance product, a licensed insurance
agent should only use materials supplied or approved by the appointing insurer or appointing agency (as applicable) as required under Standard and Practice 1.1(c) of the Code of Conduct for Licensed Insurance Agents. Similarly, pursuant to Standard and Practice 1.1(e) of the Code of Conduct for Licensed Insurance Brokers, technical representative (broker) should only use materials supplied or approved by the appointing insurance broker company.
18. Adequate training should be provided by insurers, licensed insurance agencies and
licensed insurance broker companies to ensure their licensed individual insurance agents and licensed technical representatives have a good understanding of the nature and the risks associated with premium financing, for the purpose of reducing the risk of sales that do not meet the needs of customers as required under Paragraph 7.7(a) of GL16, and to satisfy General Principle 4 of the Code of Conduct.
19. Regarding the training materials on premium financing, they should be well balanced,
without over emphasizing the leveraging benefits of premium financing and, more importantly, provide the insurance intermediaries with a good understanding on the key aspects of premium financing (including key risks, implications and commonly used terms, etc.) and how these aspects may have adverse impacts on the outcome of the insurance policy.
20. Insurers and insurance intermediaries must clearly explain to the customers the impact
of their use of premium financing on the customers’ rights to cancel the policy within the Cooling-off Period prescribed in GL29. Insurers should update10 the cooling-off notice accordingly to reflect the change in circumstances.
21. Insurers, licensed insurance agencies and licensed insurance broker companies should
have proper controls, procedures and adequate supervision to ensure their staff, licensed 10 For example, there may be circumstances where the rights to cancel the policy will be assigned to the lender and the cancellation of the policy will require the consent of the lender/assignee. In such cases, it should be properly reflected in the cooling-off notice to ensure clear understanding by the customers pursuant to the requirements under GL29.

individual insurance agents and licensed technical representatives comply with the supervisory standards and key requirements stipulated herein. In particular – (a) their on-going monitoring mechanism should cover the compliance controls on premium financing, with a view to identifying whether any inappropriate sales practices have taken place11; (b) their mystery shopping programs (if any) should cover regulated activities involving premium financing, in addition to the ordinary sale of insurance products; and (c) they should review the declarations made by the customers in the IFS-PF to examine whether the sales practices of the insurance intermediaries align with their internal policies12. Compliance with the supervisory standards and key requirements
22. In assessing whether the supervisory standards and key requirements have been
satisfied, the IA will adopt a principle-based approach. This approach requires that the underlying objective and substance of each requirement in this circular be achieved, regardless of the exact form of arrangement adopted by insurers or insurance intermediaries to achieve it.
23. Non-compliance with the supervisory standards and requirements would not by itself
render an insurer or an insurance intermediary liable to judicial or other proceedings. Non-compliance with the supervisory standards and requirements may, however, reflect on the IA’s view of the continued fitness and properness of (i) the directors, chief executives, controllers and key persons in relevant control functions of the insurers to which the standards and requirements apply and (ii) the insurance intermediaries to which the standards and requirements apply and (in the case of licensed insurance agencies and licensed insurance broker companies) their directors, controllers and responsible officers. The IA may also take guidance from the supervisory standards and requirements in considering whether there has been an act or omission likely to be prejudicial to the interest of (potential) policy holders, albeit the IA will always take account of the full context, facts and impact of any matter before it in this respect.
24. The supervisory standards and requirements in this circular shall come into effect on 1
January 2023 (“effective date”). For the avoidance of doubt, the supervisory standards and requirements in this circular shall apply to all applications of life insurance policies received by the insurer on or after the effective date. 11 For example, insurers, licensed insurance agencies and licensed insurance broker companies should look into their staff, licensed individual insurance agents and licensed technical representatives with 1) exceptionally high rate of customers refusing to provide details of the premium financing facility, or 2) high amount of insurance applications involving the use of premium financing yet the customers had declared that no solicitation or recommendation on the use of premium financing had taken place. 12 For example, some insurers, licensed insurance agencies and licensed insurance broker companies have internal rules or guidelines prohibiting their staff, licensed individual insurance agents and licensed technical representatives from soliciting or making recommendations on the use of premium financing.

For enquiries about the contents of this circular, please contact your case officers. Yours faithfully, Carol Hui Executive Director Long Term Business Division Insurance Authority c.c. Hong Kong Monetary Authority The Hong Kong Federation of Insurers The Hong Kong Confederation of Insurance Brokers Professional Insurance Brokers Association

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Annex
IMPORTANT FACTS STATEMENT – PREMIUM FINANCING
This “Important Facts Statement – Premium Financing” (“IFS-PF”) aims to help you understand the factors to be considered and the risks involved in funding the purchase of your life insurance policy using premium financing. Your licensed insurance intermediary should fully explain to you the implications and associated risks involved in the use of premium financing to pay for the premium of a life insurance policy. If you do not understand any of the following paragraphs or the advice or information provided to you by the licensed insurance intermediary is different from the information in this IFS-PF, please do not sign this IFS-PF and do not proceed with the application for premium financing. In addition, you should make sure that you are fully aware of your rights and responsibilities under the loan contract and policy assignment agreement between you and the lender (usually a financial institution) that providing you with the premium financing facility (also known as loan facility). You may request the Chinese version of this statement from your licensed insurance intermediary. 閣下可向持牌保險中介人索取本文件的中文版本。 SOME IMPORTANT FACTS YOU SHOULD KNOW Please read carefully before signing. Your licensed insurance intermediary should clearly explain the following to you. Important Notes & Implications

1. What premium financing is about: Premium financing is an insurance funding
   arrangement whereby you, as the proposed policy holder, borrow funds from the lender to pay for the premium of the proposed life insurance policy (the “Policy”) and in doing so, you would assign all or part of your rights under the Policy to the lender as collateral.
2. Stand-alone arrangement/contract: Premium financing is a stand-alone arrangement
   between you and the lender. It is not, and does not form part of the insurance contract between you and [the name of Authorized Insurer] (the “Insurer”). The Insurer is not a party to the loan contract or policy assignment agreement and is therefore not governed by the terms and conditions (including dispute resolution) of these contract and agreement you enter into with the lender. In case you have any questions about the terms and conditions, you should contact the lender.
3. Restriction of rights under the Policy: All or part of your rights under the Policy will
   be assigned to the lender as collateral via a deed of assignment. Subject to the terms and conditions of the loan contract and policy assignment agreement, the lender will be entitled to exercise all or part of the rights under your Policy, and you will not be able to exercise those rights unless the lender’s approval is obtained. Examples of those rights include:

• receive any benefits (including surrender value, death benefit, etc. ) payable by the
  insurer under your Policy;
• cancel your policy within the cooling off period, surrender the policy, or make
  withdrawals;
• apply for policy loan, or exercise any options under the policy; and

Annex

• make certain changes or amendments to your Policy (e.g. appointment of new
  beneficiary, further pledge or assign the policy).
  You should therefore carefully read the terms and conditions of the loan contract and policy assignment agreement, and consider how these potential adverse impacts may affect the outcome of the Policy and whether the Policy is still suitable for you.

4. Shortfall in actual benefits receivable: The actual net benefits receivable under the
   proposed policy financed by premium financing will be less than the amount indicated in the relevant Benefit Illustration, as part of the benefit payments would be offset by the repayment of the loan facility (including the principal amount of the loan and the relevant interest). This shortfall may be significant especially if you intend to pay a substantial portion of the premium using premium financing.
5. Release and access of information: The lender will be given rights to access your
   policy information and may from time to time instruct the Insurer to release information relating to your Policy, for example, surrender value, cash value, and any loans or advances on the Policy.
6. Risk of collateral top-up and repayment on demand: Your loan facility may be
   subject to review by the lender and the lender has the right to restructure or terminate the loan facility at any time. The lender may request you to provide additional collateral, or partially or fully repay the outstanding loan, under particular circumstances stated in the loan contract. If you fail to meet the request(s), the lender may restructure or terminate the loan facility or exercise its rights on the Policy such as surrendering the policy. You should read the terms and conditions of the loan contract, for example the frequency of review, the circumstances that may trigger the request(s) and the relevant arrangements of the request(s). You should consider your financial affordability in meeting the particular circumstances stated in the loan contract before purchasing life insurance products through the use of premium financing.
7. Consequence of late repayment and default of loan facility: If the Policy is funded
   by a loan facility, you are obligated to repay the outstanding loan amount and interest payments according to the repayment schedule under the terms and conditions of the loan contract. Any late or default of loan repayment over the course of the loan facility, including interest payment and principal repayment, may trigger the lender to demand the repayment of the loan immediately. The lender may surrender the policy and recover the defaulted payment, causing you significant financial losses and loss of insurance coverage. You may not be able to obtain the same insurance coverage for reasons such as changes in health conditions. You shall remain liable for any shortfall between the amounts of the proceeds of the policy and the outstanding amount of the loan facility. In addition, the lender may set off any obligation under the loan facility owed by you to the lender against any obligation owed by the lender to you (including credit balances in any account you maintain with the lender).

Annex
8. Impact of early termination/surrender/withdrawal: If the lender exercises its right
under the terms and conditions of the policy assignment agreement to terminate or surrender the policy, or withdraw cash value before the end of policy term:

• the amount of benefits receivable under the policy may be substantially less than
  the sum of total premium paid, interest expenses incurred and early repayment penalty imposed (if applicable) under the loan contract, especially in the early years of the policy;
• you may partially or fully lose the insurance coverage and may not be able to obtain
  the same insurance coverage;
• you may lose the entitlement to dividends, bonuses, etc. under the policy;
• the lender may apply all or part of the benefits receivable under the policy against
  the outstanding amounts owed by you (whether or not the outstanding amounts are under the loan facility); and
• in cases where the policy is required as part of conditions in your business or other
  arrangements, the termination of the policy may trigger further events of defaults in these arrangements with adverse consequences.

9. Impact of death of insured: In the event of the death of the insured, the amount of
   death benefit receivable under the policy may be substantially less than the sum of total premium paid, interest expenses incurred and early repayment penalty imposed (if applicable) under the loan contract, and you may suffer a significant financial loss.
10. Exposure to interest rate fluctuation: The interest payment of the loan facility for
    premium financing will affect the net rate of return (i.e. net of interest payment) you plan to achieve in your Policy with the use of premium financing. You may be exposed to significant interest rate risk if the interest rate of the loan facility is not fixed (i.e. floating rate subject to changes from time to time). Even in the case of fixed interest rate, the lender may have discretion to adjust the interest rate on the loan facility from time to time. Any increase in interest rates applicable to the loan facility will increase the cost of servicing the loan facility (i.e. increase in regular interest payments.). You may not be able to service the loan facility and may hence default when there is a substantial increase in the interest rate. Also, in cases where the interest rate of the loan facility is substantially higher than the returns received from the policy, you will suffer a significant financial loss.
11. Exposure to risk of non-guaranteed benefits fluctuation: If your Policy includes
    non-guaranteed benefits, the projected non-guaranteed benefits shown in the Benefit Illustration are determined under the assumed investment return and are not guaranteed. If the investment return assumed for your Policy is not achieved, your non-guaranteed benefits may be lower than those illustrated or substantially lower than the interest applicable to the loan facility, and in certain circumstances, may even be zero. If the total return generated by the Policy is substantially lower than the interest payable under the loan facility, you will suffer a significant financial loss.
12. Exposure to exchange rate fluctuation: Exchange rate exposure arises when the loan
    currency differs from the policy currency. In the case of premium financing, you may be required to convert the proceeds received under your Policy into the loan currency,

Annex
under the prevailing exchange rate, before being able to settle the loan repayments. In cases where the proceeds received from the policy is substantially lower than the outstanding loan amount due to adverse fluctuation in the exchange rate, you will suffer a significant financial loss.
13. Exposure to credit risk: You are subject to the credit risk of the Insurer. In the event
that the Insurer becomes default on its obligations or an adverse change in its credit rating, the lender may, at its discretion, ask for additional collateral, adjust your credit limit, restructure or even terminate the loan facility. You may be obligated to repay the loan, the interest and administrative fee accrued immediately, and you shall remain liable for any shortfall between the amounts of the proceeds of the policy and the outstanding amount of the loan facility.
14. Payment timing mismatch: There is a possibility that the proceeds from your Policy
will not be remitted to the lender on or before the repayment date as specified in the loan contract (e.g. due to loan facility maturity date being earlier than your policy maturity date, or turn-around-time for policy benefits disbursement), resulting in the default of loan repayment by you. You will be solely liable for any late penalty interest or defaulting interest imposed by the lender under the terms and conditions of the loan contract.
15. Impacts on cooling-off right: Your right to cancel this Policy within the cooling-off
period may be assigned to the lender, and therefore any cancellation request may be subject to the lender’s consent. For a policy acquired through the use of premium financing and cancelled within the cooling-off period, you may be obligated to repay the loan principal, early repayment penalty (if applicable), interest and other administrative fee accrued under the premium financing facility. Declaration by the Applicant / Proposed Policy Holder I confirm that the above “Important Notes & Implications” have been explained to me by the Licensed Insurance Intermediary, and I have read and understood its contents. Recommendation or solicitation involving the use of premium financing (Please check either one of the following boxes)

• I confirm that the Licensed Insurance Intermediary HAS NOT recommended or
  solicited me to use premium financing to fund the purchase of the Policy. OR
• I confirm that the Licensed Insurance Intermediary HAS recommended or solicited
  me to use premium financing to fund the purchase of the Policy.

Annex
[Note to insurers and insurance intermediaries: The following section regarding information on the proposed premium financing facility is not applicable and can be removed in cases where the licensed insurance intermediary already has access to the information on the proposed premium financing facility] Information on the proposed premium financing facility (Please check either one of the following boxes) Note to Applicant / Proposed Policy Holder: The information on the proposed premium financing facility would be used by the Licensed Insurance Intermediary to assess your suitability and affordability to use premium financing to fund the purchase of the Policy. You are strongly advised to provide the information on the facility to the best of your knowledge. If the terms and conditions of the premium financing facility eventually offered by the lender are less favorable (e.g. a higher loan interest rate) than the information you provide below, you should contact your Licensed Insurance Intermediary immediately so that he / she can re-assess your suitability and affordability to use premium financing to fund the purchase of the Policy.

• I am willing to provide to the best of my knowledge the information on the proposed
  premium financing facility below:
  Name of lender:
  Loan amount (Please specify the currency):
  Loan interest rate (e.g. Reference Rate + x%):
  Loan tenor (e.g. 120 monthly installments):
  Repayment amount for each installment (e.g.
  HKDxx,xxx per month):
  OR
• I do not wish to provide information on the proposed premium financing facility. I
  understand that the Licensed Insurance Intermediary would not be able to assess my suitability and affordability to use premium financing without the information and would perform the suitability assessment and affordability assessment as if I am not acquiring the Policy using premium financing (i.e. the total premium is to be funded entirely by my own funds). Warning: you must read all items carefully and check that the licensed insurance intermediary has explained all the information in this IFS-PF before you sign this statement. Signature of the Applicant / Proposed Policy Holder Full Name of the Applicant / Proposed Policy Holder Date (DD/MM/YYYY)

Annex
Declaration by the Licensed Insurance Intermediary I declare that I have discussed and fully explained the Important Notes & Implications covered in this IFS-PF, including the implications and associated risks, to the Applicant / Proposed Policy Holder regarding his/her decision to use premium financing to fund the purchase of the Policy. I further declare that I have not made any inaccurate or misleading statements or representations, or withheld any information which may affect the decision of the Applicant / Proposed Policy Holder. Signature of the Licensed Insurance Intermediary Full Name of the Licensed Insurance Intermediary IA License No. Date (DD/MM/YYYY)

Annex
《重要資料聲明書――保費融資》
本《重要資料聲明書――保費融資》（《聲明書》）旨在幫助閣下瞭解，使用保費融
資以獲取資金購買人壽保險保單時須考慮的因素以及所涉及的風險。閣下的持牌保險
中介人應向閣下充分解釋，使用保費融資支付人壽保險保單的保費所涉及的影響及相
關風險。
若閣下不明白以下任何一段，或認為持牌保險中介人向閣下提供的建議或資料與本
《聲明書》的內容有異，請勿簽署本《聲明書》，以及請勿繼續申請保費融資。此外，
就閣下與提供保費融資的貸款方（通常為金融機構）所簽訂的貸款合約和保單轉讓協
議，閣下應確保自己已完全瞭解其中的權利和責任。
閣下可向持牌保險中介人索取本《聲明書》的英文版本。You may request the English version of this statement from your licensed insurance intermediary. 此乃重要資料 閣下必須細閱 簽署前請仔細閱讀。 閣下的持牌保險中介人須清晰地向閣下解釋以下內容。 重要說明及影響

1. 什麼是保費融資：保費融資是一種保單融資安排，指閣下作為投保人，向貸款
   方借款以支付人壽保險保單（「保單」）的保費，同時將閣下所擁有的全部或
   部分保單權利作爲抵押品轉讓予貸款方。
2. 獨立的安排/合約：保費融資是閣下與貸款方之間的獨立安排，既不是也不構成
   閣下與[獲授權保險公司的名稱]（「保險公司」）之間的保險合約的一部分。保
   險公司不是貸款合約和保單轉讓協議的合約方之一，因此不受閣下與貸款方所
   簽訂的合約和協議的條款及細則（包括糾紛調解）約束。如果閣下對相關條款
   及細則有任何疑問，應聯絡貸款方。
3. 保單權利受限：保單轉讓協議將通過契據形式將閣下所擁有的全部或部分保單
   權利作爲抵押品轉讓予貸款方。根據貸款合約和保單轉讓協議的條款及細則，
   貸款方將有權行使閣下保單的全部或部分保單權利，而閣下在未經貸款方批准
   前不能行使這些權利。這些保單權力可能包括：

• 收取保險公司根據保險合約應支付的任何利益（包括退保價值、身故賠
  償等）；
• 在冷靜期內取消保單、在冷靜期後退保或提取保單價值；
• 申請保單貸款或行使保單內的任何選項；及
• 更改或修訂保單（例如更改受益人、將保單再次抵押或轉讓）。
  因此，閣下應仔細閱讀貸款合約和保單轉讓協議的條款及細則，考慮相關條款
  及細則對閣下的保單可能造成的潛在不利影響，並考慮該保單是否仍然適合閣
  下。

Annex
4. 實際利益不足：由於部分保單利益將被用於支付保費融資的欠款（包括貸款本
金及相關利息），保費融資保單的實際淨利益將少於相關利益說明文件中所顯
示的金額。如果閣下打算使用保費融資支付大部分所需保費，此差額可能非常
顯著。
5. 保單資料的發放及查閱：貸款方將有權查閱閣下的保單資料，保險公司可能須
按貸款方的指示不時將閣下的保單資料發放予貸款方，例如退保價值、現金價
值以及保單的任何貸款或墊款資料。
6. 提供額外抵押品及按貸款方要求還款的風險：貸款方可能有權不時重新檢視閣
下的貸款，並有權隨時重組或終止該貸款。在貸款合約中訂明的特定情況下，
貸款方可能會要求閣下提供額外的抵押品，或即時償還部分或全部欠款。如閣
下無法滿足貸款方的要求，貸款方可能會重組或終止該貸款，或行使貸款方所
擁有的保單權利，例如退保以收回欠款。
閣下應仔細閱讀貸款合約的條款及細則，例如貸款檢視頻率和次數、可能引致
上述情况的條件及相關安排等。閣下在使用保費融資購買保單之前，應考慮自
己的財務負擔能力是否能夠滿足貸款合約中訂明的各種特定情況。
7. 逾期還款及拖欠還款的後果：如閣下以保費融資貸款支付保費，閣下須根據貸
款合約的條款及細則和還款時間表依期償還貸款本金及利息。如有任何逾期或
拖欠還款（包括利息和本金），貸款方可能會要求閣下立即償還所有欠款。貸
款方亦可能會將閣下的保單退保以收回拖欠款項，從而導致閣下失去保單提供
的保障並蒙受重大財務損失。閣下往後亦可能因某些轉變（例如健康狀況）而
不能重新投保以獲得相同的保險保障。如保單退保後取回的金額不足以支付欠
款，閣下仍須為相關差額負責。
此外，閣下於貸款方的其他結餘（包括任何類型的戶口餘額）有可能被用作支
付閣下所拖欠的保費融資貸款。
8. 提前終止保單/退保/提取保單價值的影響：如果貸款方根據保單轉讓協議的條款
及細則在保單期滿前終止保單、退保或提取保單價值:

• 保單利益可能會遠低於已繳交的總保費、貸款合約下的利息支出和提前
  還款罰款（如適用）的總和，尤其是在保單生效後的最初幾年；
• 閣下可能會失去部份或全部保單提供的保障，而閣下將來未必能夠重新
  投保以獲得相同的保險保障；
• 閣下可能會失去保單應得的各種紅利；
• 貸款方可能會取用閣下的全部或部分保單利益以支付閣下於貸款方的其
  他欠款（不論是否與保費融資貸款有關）；及
• 如閣下同時使用該保單作為業務或其他安排的條件或擔保，保單被終止
  後可能會導致相關安排違約並帶來不利後果。

9. 受保人身故的影響：若受保人身故，保單所支付的身故賠償金額可能會遠低於
   已繳交的總保費、貸款合約下的利息支出和提前還款罰款（如適用）的總和，
   閣下可能因此蒙受重大財務損失。

Annex
10. 利率波動風險：保費融資貸款的利息支出會影響閣下以保費融資購買保單的預
期淨回報率（即扣除利息支出後的回報）。若貸款利率並非固定（即是會不時
變動的浮息），閣下可能需承受重大利率風險。即使貸款利率以定息計算，貸
款方亦可能有權根據貸款合約不時調整貸款利率。貸款利率上升會增加閣下的
償債成本（即定期須支付的利息有所增加）。若貸款利率大幅上升，可能導致
閣下未能如數還款而因此違約。此外，若貸款利率遠高於保單的回報，閣下將
蒙受重大財務損失。
11. 非保證利益波動風險：若閣下的保單包含非保證利益，利益說明文件中顯示的
非保證利益乃基於投資回報的假設，並不保證可以實現。若閣下保單的投資回
報未能達到該假設，閣下可獲得的非保證利益則可能低於利益說明文件中顯示
的金額，或大幅低於閣下須支付的貸款利息；在某些情況下，非保證利益甚至
可能為零。
如果保單的總回報遠低於閣下須支付的貸款利息，閣下將蒙受重大財務損失。
12. 匯率波動風險：若貸款貨幣與保單貨幣不相同，便會出現匯率風險。在保費融
資的情況下，閣下可能需要先將保單收益按當時的匯率由保單貨幣兌換至貸款
貨幣，才能償還貸款。若匯率出現不利波動導致閣下的保單收益大幅低於未償
還的貸款金額，閣下將蒙受重大財務損失。
13. 信貸風險：閣下須承受保險公司的信貸風險。若保險公司未能履行其於保單的
責任，或其信貸評級有不利變化，貸款方可能有權要求閣下提供額外的抵押
品、調整閣下的信貸限額、重組甚至終止貸款。閣下可能須立即償還所有貸款
本金、利息及行政費用。如閣下從保單中獲得的收益不足以支付欠款，閣下則
仍須為相關差額負責。
14. 付款時間落差：閣下可能因為保單收益未能在貸款合約規定的還款日或之前匯
至貸款方（例如貸款到期日早於閣下的保單期滿日，或保險公司需時處理保單
利益發放），而導致閣下拖欠還款而違約。閣下將要全數承擔貸款方根據貸款
合約的條款及細則所徵收的任何逾期罰息或違約利息。
15. 對冷靜期權利的影響：由於閣下在冷靜期內取消保單的權利可能因保單轉讓協
議而被轉讓予貸款方，故此任何取消保單的要求均可能須先徵得貸款方同意。
即使閣下已在冷靜期內取消保單，閣下可能仍須償還保費融資貸款的本金、提
前還款罰款（如適用）、利息及其他行政費用。
申請人／投保人聲明
本人確認持牌保險中介人已向本人解釋上述「重要說明及影響」，而本人亦已閱讀
並明白其內容。

Annex
保費融資的建議或招攬
（請在適當的方格內填上剔號，只可選擇一項）

• 本人確認持牌保險中介人沒有建議或招攬本人使用保費融資以獲取資金
  購買此保單。
  或
• 本人確認持牌保險中介人有建議或招攬本人使用保費融資以獲取資金購
  買此保單。
  [保險公司和保險中介人注意: 若持牌保險中介人已得悉擬申請的保費融資貸款的資
  料，以下有關保費融資貸款資料的部份將不適用並可予以刪除。]
  保費融資貸款資料
  （請在適當的方格內填上剔號，只可選擇一項）
  申請人／投保人請注意：持牌保險中介人將使用閣下擬申請的保費融資貸款預估
  資料，以評估閣下是否適合及是否有負擔能力使用保費融資以獲取資金購買此保
  單。我們強烈建議閣下盡閣下所知而提供相關資料。如貸款方最終提供的貸款條
  款及細則遜於以下資料(例如較高的貸款利率)，閣下應立即聯絡持牌保險中介人
  以重新評估閣下是否適合及是否有負擔能力使用保費融資以獲取資金購買此保
  單。
• 本人願意盡本人所知而提供的保費融資貸款預估資料如下：
  貸款方名稱：
  貸款金額（請註明貨幣）：
  貸款利率（如參考利率+X%）：
  貸款期（如分期 120 個月）：
  每期還款金額（如每月 xx,xxx 港元）：
  或
• 本人不願意提供保費融資貸款的預估資料。本人明白持牌保險中介人將
  無法評估本人是否適合及是否有負擔能力使用保費融資，並將假設不使
  用保費融資以評估本人是否適合及是否有負擔能力購買此保單（即全部
  所需保費均由本人承擔）。
  忠告：簽署本《聲明書》前，閣下必須仔細閱讀所有項目，並確保持牌保險中介人
  已解釋本《聲明書》中的所有資料。
  申請人／投保人
  簽署
  申請人／投保人
  全名
  日期
  （日 / 月 / 年）

Annex
持牌保險中介人聲明
本人聲明，本人已與申請人／投保人就其使用保費融資以獲取資金購買此保單的決
定，進行了討論並充分解釋了本《聲明書》中的重要說明及影響，包括潛在影響和
相關風險。
本人進一步聲明，本人並沒有作出任何不準確或誤導的陳述或聲明，或隱瞞任何可
能影響申請人／投保人決定的資料。
持牌保險中介人簽署 持牌保險中介人全名
保監局牌照號碼 日期（日 / 月 / 年）

Annex
Requirements in respect of the Important Facts Statement – Premium Financing (“IFS￾PF”) (1) The IFS-PF is required for all new applications for contracts of insurance classified as “long term business” as defined in the Insurance Ordinance (Cap 41) to be acquired through the use of “premium financing”. For the avoidance of doubt, the IFS-PF is not required for policies acquired by customers with premiums fully paid using the customers’ own funds (i.e. without the use of premium financing). Customers cannot opt out of this requirement. (2) For the purpose of the IFS-PF, premium financing is defined as an insurance funding arrangement whereby the customer, borrows funds from the lender (usually a financial institution) to pay for the premium of the life insurance policy, and in doing so, assigns all or part of his/her rights under the proposed policy to the lender. (3) In the following circumstances, the IFS-PF should be presented and explained to the customers. It is not an exhaustive list. Authorized insurers and licensed insurance intermediaries should adopt a prudent approach in assessing whether the customers are interested in the use of premium financing. (i) The customer has indicated his/her preference for the use of premium financing for his/her insurance application. (ii) The customer has indicated that part of his/her source of premium payment will come from premium financing. (iii) The customer has submitted a written consent to assign all or part of his/her rights under the proposed policy to a lender prior to policy issuance. (4) Authorized insurers must not issue any life insurance policies that are acquired through the use of premium financing unless they have received the IFS-PF duly completed by the proposed policy holder and the relevant licensed insurance intermediary. (5) The IFS-PF should be adopted in full by authorized insurers and licensed insurance intermediaries. Authorized insurers and licensed insurance intermediaries can modify the exact wordings of the IFS-PF depending on the particular circumstances13 of the case. However, any such modifications must be justifiable on the basis that, (i) the modified wordings would not be misleading or deviate from the purpose of the IFS-PF; (ii) in spite of the changes made, the principle of “fair customer treatment” continues to be satisfied; and (iii) the reason(s) for such change must be documented. (6) The IFS-PF should be presented as a separate form. In case an authorized insurer or a licensed insurance intermediary intendsto include it as a separate section within another point-of-sale document (e.g. application form), prior consultation with the IA is required. (7) The licensed insurance intermediary dealing with the application is required to go through the IFS-PF point-by-point with the customer. Both the licensed insurance 13 For example, the insurer may be a contractual party to the premium financing arrangement in some cases and therefore Item 2 of the “Important Notes
& Implications” of the IFS-PF needs to be suitably modified to reflect this. Item 11 may also be removed if the proposed insurance policy does not offer any non-guaranteed benefits.

Annex
intermediary and the customer must sign the declaration sections of the IFS-PF, respectively. (8) The originals of the signed IFS-PF should be kept by the authorized insurer. The authorized insurer must provide a copy of the IFS-PF to the customer at a time no later than policy delivery (i.e. it can be delivered together with the policy). (9) Authorized insurers and licensed insurance intermediaries should provide customers with English or Chinese version of the IFS-PF for signature according to the customer’s preference.