Hong Kong Caps Life Insurance Commissions to Reduce Competition

News Desk: Hong Kong’s life insurance market continued to expand solidly through 2024 and 2025, lifted by recovering demand from mainland Chinese visitors and a steady domestic customer base, according to analysis published by CreditSights.

Mainland visitor interest rebounded strongly last year even as authorities tightened controls on cross-border fund movements, and the research firm judges that the direct impact of those restrictions is likely to stay limited.

Several new regulatory measures are now reshaping competition among life insurers.

From 1 July 2025, a six percent ceiling applies to the illustrated returns that can be shown on Hong Kong dollar participating policies.

At the same time, first-year commissions paid to agents have been capped at seventy percent, while referral fees charged by brokers face a fifty percent limit.

CreditSights expects these rules to favour companies that already possess established agency and bancassurance networks that write longer-duration policies and that maintain higher standards of distribution quality.

The full introduction of the risk-based capital regime on 1 July 2024 has added another layer of discipline.

Replacing the older Solvency I approach, the new three-pillar framework tests capital against a one-in-two-hundred-year stress scenario.

Insurers are responding by shifting investment portfolios toward higher-quality fixed-income assets and by tightening asset-liability matching so that capital is used more efficiently.

The Insurance Authority has also begun offering preferential capital treatment for qualifying infrastructure debt and equity, reducing stress factors on eligible Category A assets in Hong Kong and mainland China, and providing extra incentives for Hong Kong dollar government infrastructure bonds.

Across the border, mainland life insurers continue to confront pressure from falling long-term government bond yields that have widened asset-liability mismatches on products carrying guaranteed returns.

Firms there are cutting risk by moving away from non-participating savings contracts toward participating designs, by repricing long-term savings products, and by expanding higher-margin protection business.

The contrast underlines how Hong Kong’s combination of recovering visitor demand and tighter local rules is creating a more competitive yet more disciplined operating environment for life writers.