The International Association of Insurance Supervisors requires that insurance regulators should be financially and operationally independent of the Government and the industry.
The costs for establishing and operating the Insurance Authority (IA) in its initial years are being covered by government funding. In the long run, the IA has to be financially independent and recover its operating costs through the collection of premium levies payable by policy holders and fees payable by insurance companies, designated insurance holding companies, intermediaries and users for specific services.
- Levies on insurance premium
- Authorization and annual fees
- Designation and annual fees
- Prescribed fees for specific services
Levies on insurance premium
Under the Insurance Ordinance, with effect from 1 January 2018, levies for insurance premiums are payable by policy holders to the IA through their insurance companies. To reduce the impact on policy holders and to allow time for adaptation, an incremental approach has been adopted. As stipulated in the law, the levy rate started at 0.04% of insurance premiums and will be adjusted gradually until it reaches 0.1%, subject to a levy cap.
Scope of Premium levy
Premium levies are payable along with premium payments by policy holders of all long term (or life) insurance policies and general insurance policies (such as travel, motor, property or household insurance). Reinsurance business, policies underwritten by authorized captive insurers, and marine, aviation and goods-in-transit insurance are levy exempted.
Premium Levy rates and cap
The levy payable at 0.1% of insurance premium is subject to a cap of $100 and $5,000 for long term (corresponding single or annualized premiums at or above $100,000) and general (corresponding annual premiums at or above $5 million) insurance policies respectively. Group life insurance policies with medical protection offered by employers are subject to the levy cap for general insurance policies.
Ms. A bought a property insurance policy with an inception date1 of 1 April 2021. Her monthly premium is $1,000. The total levy payable from April 2021 to March 2022 will be, being the lower of:
- $12 (being $1,000 x 12 x 0.1%); or
- $5,000 (the cap for general insurance policies)
1 “Inception date” means the date on which the first premium under the contract becomes payable.
Mr. B bought a long term insurance policy with an inception date of 1 April 2021. His annual premium is $150,000. When making his payment for the annual premium payable on 1 April 2021, the levy payable for his policy will be, being the lower of:
- $150 (being $150,000 x 0.1%); or
$100 (the cap for long term insurance policies)
Company C plans to buy a nine-month property insurance policy in April 2021 for immediate inception. The single premium payable is $6,000,000. The levy payable for this policy will be, being the lower of:
- $6,000 (being $6,000,000 x 0.1%); or
$5,000 (the cap for general insurance policies)
(Note: The cap remains unchanged even contract period falls less than one year.)
Mr. D’s long term insurance policy has an inception date of 1 January 2020. The policy requires him to pay a premium of $300,000 every 18 months. Along with the premium payable in 1 July 2021, the levy payable for his policy will be, being the lower of:
- $300 (being $300,000 x 0.1%); or
$150 (the pro-rated cap for long term insurance policies, being $100 x 18/12 months)
(Note: The cap is pro-rated for policies with scheduled premium payable once in more than a year.)
Publications and Publicity materials
Authorization and annual fees
The Insurance Companies (Authorization and Annual Fees) (Amendment) Regulation 2017 has come into operation since 26 June 2017. For details on ascertainment of variable fee and the payment requirement, please refer to the attached Note on Annual Authorization Fee.
Designation and annual fees
The Insurance (Designation and Annual Fees for Designated Insurance Holding Companies) Regulation (Cap 41N) has come into operation since 29 March 2021.
Under the section 95F(1) of the Insurance Ordinance (Cap. 41) (“IO”), a designated insurance holding company (“DIHC”) must pay a designation fee payable on designation and fees payable at prescribed intervals (annual fees) no later than the payment due dates to be prescribed for such fees. The designation fee and an annual fee payable by a DIHC will be calculated at a flat rate of 0.0026% of the group insurance liabilities of the DIHC, with a fee payable subject to a floor of HK$10 million and a ceiling of HK$60 million. Pro-rata calculation of the amount of the designation fee where the date of designation of the DIHC is not 1 April is also provided.
Prescribed fees for specific services
The Insurance Companies (Register of Insurers) (Prescribed Fee) (Amendment) Regulation 2017 has come into operation since 26 June 2017.
The Insurance (Prescribed Fees) (Amendment) Regulation 2020 has come into operation since 29 March 2021.Please refer to the table attached on matter in respect of which fee must be paid and its respective amount.