Regulatory Alerts2026-08-20
Added
Observations on insurance business carried on with the use of premium financing facilities
The Insurance Authority (IA) reminds authorized insurers carrying on long term insurance business of their obligations under the Insurance Ordinance and related regulations when underwriting policies using premium financing facilities, particularly regarding risk identification, monitoring, and management. Insurers must rigorously apply product governance (Guideline on Underwriting Long Term Insurance Business, GL16) and Enterprise Risk Management (ERM) frameworks (Guideline on Enterprise Risk Management, GL21), including conducting ongoing product reviews for premium-financed products, documenting these reviews, and taking remedial actions for identified deficiencies. They are also required to assess if their ERM framework remains comprehensive for dominant premium financing portfolios, identify associated risks, incorporate assessments into Own Risk and Solvency Assessment (ORSA) reports, and enhance stress testing. Furthermore, insurers must proactively review sales and training materials to ensure clear and prominent disclosure of potential significant losses and downside risks associated with premium financing, especially concerning policy leverage, and monitor actual leverage levels and their impact on policy breakeven year and return patterns.
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