Hong Kong authorities have relaxed rules to allow high-net-worth individuals to access an insurance product that has been gaining traction in Singapore and the U.S.
The so-called indexed universal life policy allows premium holders to pledge assets, such as equities and bonds, to the insurance company as a custodian in lieu of paying cash. It meets the demand for rich clients who seeks cash efficiency and greater flexibility.
The product — which has part of its cash value component tracking a benchmark index performance — has gained traction in the U.S., Bermuda and Singapore while previously being unavailable in Hong Kong due to regulation and risk concerns.
In a joint circular Thursday issued by the Insurance Authority and the Hong Kong Monetary Authority, the regulators said that if such policies are only offered and sold to high-net-worth customers, who are defined as professional investors, then “there is room to offset or amend the application of certain requirements” without compromising investor protection.
HSBC plans to launch such a product in Hong Kong this year catering to the demands of ultra-high-net-worth clients, the bank’s Global Insurance CEO, Edward Moncreiffe, said during a Hong Kong forum in December. The firm issued a $100 million indexed universal life policy in Singapore last year.
Hong Kong is pushing hard to develop its HK$31 trillion ($4 trillion) wealth management business as it seeks new drivers for the economy. The government proposed tax breaks and investment immigration schemes, competing against other financial hubs like Singapore.