Hong Kong Premium Levy Update
Article submitted by Nova, Hong Kong.
Collection of Premium Levy to take effect from 1 January 2018 in Hong Kong
In the past, the role of regulator of insurance companies in Hong Kong was taken up by the government through the Office of Commissioner or Insurance. Insurance Agents were registered under the insurance companies. Insurance Brokers were regulated by the approved professional bodies through the self-regulation system.
Now the Insurance Authority (IA) is set up to take over the role of regulator to insurance companies, agents and brokers. To be financially independent, the IA will start to collect premium levy from 1 January 2018. Below is the extraction of an article from IA that gives the details;
|From 1 January 2018, the Insurance Authority (IA) will start collecting a premium levy from policy holders in accordance with the law1. The levy rate will start at 0.04% of the insurance premium per policy year and increase gradually to 0.1%. The amount of the levy imposed on each policy will be subject to a cap.|
Except for certain policies2 exempt from the levy by law, policy holders of all new or in-force life insurance policies and general insurance policies (such as travel, motor, property and household insurance) must pay the levy along with their premium payment. The IA will collect the levy from policy holders via the insurance companies.
In Phase 1 (1 January 2018 to 31 March 2019), for life insurance policies with single or annualized premiums at or above HK$100,000, policy holders will pay only HK$403 at most per policy year. For general insurance policies with annual premiums at or above HK$5 million, the cap will be HK$2,000 per policy year.
Details of the levy rates and caps are set out below:
||1 January 2018 to
31 March 2019
|1 April 2019 to
31 March 2020
|1 April 2020 to
31 March 2021
| 1 April 2021 onwards|
|Levy cap (HK$)|
The IA has taken over the regulation of insurance companies from the Office of the Commissioner of Insurance since 26 June 2017 and will directly regulate insurance intermediaries through a statutory licensing regime within two years, to provide more comprehensive protection for policy holders. The Insurance Ordinance empowers the IA to collect a premium levy from policy holders, authorization fees from insurance companies and fees from users for specific services, with a view to achieving financial independence in the long run.
1The Insurance (Levy) Regulation and the Insurance (Levy) Order under the Insurance Ordinance (Cap. 41).
2Reinsurance business, policies underwritten by authorized captive insurers, and marine, aviation and goods-in-transit business are exempt from the levy.
3Group life insurance policies with medical protection offered by employers will be subject to the levy cap for general insurance policies.