Hong Kong IA to review offshore record life policies as mainland buyers await tax clarity

Hong Kong’s insurance regulator will review why the last three record-setting life policies were all written offshore and whether changes to products or other factors could bring such business to the city, Insurance Authority (IA) chief executive Clement Cheung said, as some mainland Chinese customers hold off pending clarity on new tax enforcement. 

The review follows FWD Private’s announcement that it had issued a US$318m life policy through its Bermuda entity, setting a Guinness World Records title for the most valuable life insurance policy. It was the third such record in recent years, and none was written in Hong Kong: HSBC’s policy was issued in Bermuda and Manulife’s in Singapore, Cheung told reporters at a media briefing during the International Association of Insurance Supervisors (IAIS) Annual Conference in Hong Kong on Thursday (12 November). 

“If a majority of these deals are done offshore, then it’s [only right] that we have to ask ourselves: what are the motivations?” he said. “We will reflect on ourselves as to whether there are things that we could do better to allow some of these policies to be more inclined to be in Hong Kong.” 

The IA will look at the specific product types involved and “what I can do within my abilities” to make the city more competitive, Cheung said. Hong Kong would prefer its own insurers to write such business locally, he added, though where a policy is issued ultimately rests with the client. 

Mainland China tax clarity awaited  

The discussion also comes as mainland Chinese tax authorities have reportedly begun enforcing a 20% personal income tax on gains from offshore insurance policies with cash value, such as dividend payouts and interest earned on prepaid premiums. 

Cheung said he had heard from market participants that some customers had become hesitant while waiting for clarity on how the tax would be implemented. “Not that they don’t want to do the transaction, but they want to know exactly how that policy is going to be implemented,” Cheung said. “There are a lot of issues about what is covered and what is not covered and when you’re going to pay. All this clarity will have to be given.” 

Enforcement so far has centred on offshore trusts, he said, and he did not expect insurance to be “the main driver”. The hesitation “will pass”, he added, though mainland Chinese demand may steady in the near term. 

The uncertainty follows strong first-half growth: Hong Kong’s long-term new office premiums rose 58.4% year on year to HK$275.2bn (US$35.1bn) in the first half of 2026, according to the IA’s data. Mainland Chinese customers are a significant source of business. Moody’s estimated they account for around 40% of industry-wide new business premiums and as much as 50% for some leading insurers. 

But the customer base is diversifying, Cheung said. Business from customers elsewhere in the region has been growing over the past year, even before the tax issue emerged, so the market now rests on local, mainland and other regional buyers. The IA does not publish that breakdown. 

Cheung said the market was also adapting, with more wealthy clients buying large policies using premium financing, meaning loans from private banks that cover most of the premium, with the policy as collateral. The IA is monitoring the practice to ensure it stays with high-net-worth customers who can bear the risk and does not “cascade down to the middle class”, he added. 

AI risks widen supervisory focus 

During the media briefing, IAIS secretary-general Gerry Cross identified AI-enabled cyberattacks as the single biggest concern for insurers and supervisors in 2027, citing the speed at which recent AI models have identified software vulnerabilities.  

The IAIS plans to examine AI as a special topic in its 2027 Global Insurance Market Report, including its use in underwriting, claims handling and distribution. The work will consider whether the technology requires new rules or whether existing standards on customer protection, risk management and third-party providers remain adequate as supervisors adapt to a faster-moving landscape. 

Cheung said the shift from generative to agentic AI, in which systems carry out tasks rather than answer questions, raises three questions for supervisors: governance, accountability and value to customers. Any IAIS guidance should be principle-based and “enabling”, he said, unlike the prescriptive Insurance Capital Standard. 

Cross said the IAIS is also tracking the “structural shift” in life insurance towards private equity ownership, asset-intensive reinsurance and private credit. A report last year found activity was not yet at a systemically concerning level, but “it is moving fast, and it is evolving”, he said. The key question is how risk enters the system “when the stress comes on”, such as a withdrawal of liquidity.