Fitch Ratings has indicated that proposed amendments by the Hong Kong Insurance Authority (IA) to insurers’ capital calculation framework are likely to lower capital requirements for certain carriers. However, Fitch expects the overall effect on its rated insurers to remain credit neutral, as the agency predominantly evaluates capital adequacy using its Prism Global model. Insurers may respond to the revisions by adjusting investment allocations, business mix, and risk management strategies.
The IA’s proposed changes form part of a broader update to Hong Kong’s risk-based capital (RBC) regime, initially implemented in July 2024. Key modifications aim to encourage life insurers to invest in infrastructure while recognising the evolving risk landscape, including digital assets.
Key Features of Proposed Amendments
| Area | Proposed Change | Expected Impact |
|---|---|---|
| Infrastructure Investments | Preferential capital treatment for eligible projects, similar to South Korea | Reduced capital charges may incentivise investments in Hong Kong and mainland China infrastructure; diversification benefits between infrastructure equity and other equities |
| Crypto Assets & Stablecoins | Maintains zero capital value; 100% stress test proposed | Limited practical impact due to high volatility and zero dividend yield |
| Natural Catastrophe Risk | Recalibrated capital requirements; insurers may use own 1-in-200-year aggregate loss estimates | Beneficial for international insurers with multi-region exposure; geographic diversification reduces required capital |
| Indexed Universal Life Products | Recognition of different risk profile versus traditional unit-linked products | Matching adjustment mechanisms allowed; insurers assume greater asset-liability management discretion |
The IA notes that infrastructure investments align with the long-term liability horizon of life insurers. Nevertheless, individual decisions will depend on each insurer’s risk appetite, strategic objectives, portfolio scale, and liquidity considerations. Fitch observes that currently, local rated insurers maintain only minimal exposure to infrastructure assets.
Regarding digital assets, while stablecoins and cryptocurrencies are increasingly popular, insurers are expected to remain cautious. With zero capital value and full stress-test requirements, any potential capital recognition benefit is likely to be offset.
For insurers operating across multiple regions, recalibrated catastrophe risk charges offer potential capital relief. Enhanced diversification provisions allow insurers to account for geographical risk spread, and where coverage limits are unspecified, insurers may employ their own 1-in-200-year annual aggregate loss estimates, subject to regulatory justification.
The amendments also differentiate indexed universal life products sold to professional investors from standard unit-linked business. Unlike conventional unit-linked policies, where policyholders assume investment risk, indexed universal life products provide insurers with greater discretion over asset-liability management, making matching adjustment mechanisms more appropriate for capital assessment.
The IA formally launched a public consultation on 11 February 2026, inviting feedback on these proposed amendments. The consultation reflects ongoing efforts to refine Hong Kong’s RBC framework while maintaining financial stability and encouraging strategic investment.