Hong Kong’s Insurance Authority (IA) has concluded its consultation on amendments to the Insurance (Valuation and Capital) Rules, confirming changes to the risk-based capital (RBC) regime aimed at encouraging infrastructure financing, promoting offshore reinsurance and refining capital treatment for emerging asset classes.
Concerning preferential capital treatment for eligible infrastructure investments, the IA confirmed it will proceed with lower capital charges for qualifying infrastructure assets linked to Hong Kong and the Chinese mainland.
The preferential treatment will apply not only to long-term business but will be extended to general insurers.
The IA also agreed to enhance the proposed reduction factors for certain infrastructure investments. Capital relief will be increased for Category A eligible infrastructure debt and unlisted equity, while the parameter linked to insurers’ holdings of Hong Kong dollar-denominated government infrastructure bonds will be applied to both infrastructure debt and equity risks.
The amendments include a mechanism allowing Hong Kong insurers and designated insurers that are part of non-Hong Kong insurance groups to apply for approval to exclude general offshore reinsurance business from the calculation of prescribed capital. The IA said the move is intended to promote offshore reinsurance activity in Hong Kong and align the city with comparable international regimes.
On asset treatment, the IA confirmed it will adopt a look-through approach for specified stablecoins and apply a 100% downward stress factor to crypto assets, without diversification benefits. Tokenised traditional assets such as bonds and equities will be explicitly excluded from the definition of crypto assets.
The regulator also confirmed support for allowing the use of matching adjustment for indexed universal life business, as well as refining the countercyclical adjustment mechanism for equity risk by empowering the IA to set caps and floors through notice.
