With regard to the circular released by the Securities and Futures Commission (SFC) to issuers of SFC-authorised investment-linked assurance schemes, the Hong Kong Federation of Insurers (HKFI) responds as follows:-

• Hong Kong market’s Class C business has been materially under-penetrated and under-developed compared to other mature markets where unit-linked sales are a dominant product chassis to meet retirement savings and protection gaps. The 2020 Annual Long Term Business Statistics issued by the IA shows the huge shortfall of Class C business relative to Class A. This is unsustainable in a lower-for-longer interest rate environment, especially with the upcoming risk-based capital regime to come.

• The Hong Kong Federation of Insurers (HKFI) spearheaded the discussions with the regulators since December 2019, with the aim of revitalizing the Class C market by striking a right balance between product suitability, market sustainability, customer value and intermediary development. Streamlined, and principles-based regulation will be critical to developing the Hong Kong market in accordance with international peers.

• It will be important to develop products that stimulate innovation and competition whilst ensuring fair treatment of customer and intermediary compensation. We anticipate insurers may need to revamp a portion of their on-shelf products in order to be compliant with the new requirements, whilst others will enter the market to offer high-protection (‘PLP’) or low-protection solutions.