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Under the “Insurance Ordinance”, the Insurance Authority (IA) will start to collect the levy on insurance premiums from policyholders through insurance companies from 1st January 2018.

According to the Financial Services & Treasury Bureau, while HK$650 million has been set aside for the operation of the new authority, subject to the “Insurance Ordinance”, the Insurance Authority will collect the levy from policyholders through insurance companies and fees from insurance companies and intermediaries to enable the authority to be financially independent of the Government in the long run.

The new levy will come into effect on 1st January 2018 and will be collected annually from then on. 

The collection of levy will be done incrementally in the first five years after its establishment so as to minimise its impact on the policyholders. The levy rate will start at 0.04% in 2018 and increase gradually on a yearly basis, i.e. 0.06% from 2019 to 2020, and then 0.085% from 2020 to 2021, until it reaches the target level of 0.1% in 2021 and onwards.

A cap will be imposed on the levy on general insurance policies with annual premiums at or above HK$5 million and long-term insurance policies with single or annualised premiums at or above HK$100,000. In other words, when it comes to full implementation (when the levy rate hits 0.1%), the cap for general policy will be HK$5,000 and that for long-term policy will be HK$100.

The levy is applied to the premium of all types of insurance policies except reinsurance contracts, marine, aviation and goods-in-transits businesses.

There will be a slight increase in the premium due to the implementation of the levy but product coverage under the insurance policy will not be affected.

The levy is shown as a separate item in the policy schedule and renewal notice.

“IA” is  the Insurance Authority, a regulatory body independent of the Government and the industry. IA was established on 7th December 2015 to take over the function of Office of the Commissioner of Insurance (OCI) to regulate insurance companies. The IA will now have powers to conduct its own investigations and inspections into the affairs of insurance companies and also allow for wider and discretionary disciplinary actions as against insurance companies and intermediaries.