The Hong Kong Insurance Authority (IA) has published an article highlighting risks from foreign currency borrowing, wider retail participation and rising leverage in premium financing. These arrangements accounted for 36% of new business premiums in the first half of 2026, up from around 12% in 2024. Declining HKD interest rates, while USD rates remained elevated, have revived demand. Some offshore banks offer financing in low interest rate currencies such as the Swiss franc, exposing policyholders to potentially substantial increases in borrowing and repayment costs. Disputes involving these loans are governed by foreign laws, making redress potentially difficult and costly. Some insurers also appear to be lowering entry thresholds to attract middle class customers, although leveraged borrowing is generally suitable only for high net worth individuals with sufficient liquid assets, stable and ample income, and high risk tolerance. Products with leverage ratios exceeding nine times allow policyholders to contribute only 10% of premiums upfront. Requirements in place since 2023 oblige insurers to verify that customers can repay their loans in full without surrendering their policies. Fluctuations in policy returns, loan interest rates and exchange rates can occur simultaneously and compound losses, while declining policy values can trigger demands for additional collateral. The IA is conducting its third joint inspection with the Hong Kong Monetary Authority, begun in the second half of 2026, and will consider regulatory measures in light of the findings.

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