In accordance with the Insurance (Levy) Regulation and the Insurance (Levy) Order under the Insurance Ordinance (Cap 41), the Insurance Authority will begin to collect a levy from policyholders through premium payments to insurers from January 1 2018.

The levy will be incremental and divided into four phases:

  • It will start at 0.04% during the first phase between January 1 2018 and March 31 2019.
  • It will gradually increase to 0.06% between April 1 2019 and March 31 2020.
  • There will be further increments to 0.085% between April 1 2020 and March 31 2021.
  • It will reach a rate of 0.1% from April 1 2021 onwards.

The amount of the levy imposed on each policy (ie, life insurance or general insurance) will be subject to a cap.

For example, in phase 1 for a life insurance policy with premiums of or above HK$100,000, the policyholder will pay a maximum of HK$40 for that policy year. Employers which offer group life insurance policies with medical protection will be subject to the general insurance levy.

 

Phase 1

January 1 2018–March 31 2019

Phase 2

April 1 2019–March 31 2020

Phase 3

April 1 2020–March 31 2021

Phase 4

April 1 2021 onwards

Levy rate

0.04%

0.06%

0.085%

0.1%

Levy cap

Life insurance

HK$40

HK$60

HK$85

HK$100

General insurance

HK$2,000

HK$3,000

HK$4,250

HK$5,000

If a policyholder does not pay the required levy, the Insurance Authority may impose a penalty of up to HK$5,000 on the policyholder and may recover the outstanding levy as a civil debt due to the Insurance Authority. If an insurer collects an excessive levy from a policyholder, the Insurance Authority may impose a penalty of up to HK$10,000 on the insurer.

Holders of life insurance policies and general insurance policies (eg, travel, motor, property and household) will be required to pay the levy; however, reinsurers, policies underwritten by captive insurers and marine, aviation and goods-in-transit businesses are exempt.

The insurance industry and policyholders should be prepared to adopt the new levy from January 1 2018.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Kevin Bowers or Michael Withington at Howse Williams Bowers by telephone (+852 2803 3688) or email (kevin.bowers@hwbhk.com or michael.withington@hwbhk.com). The Howse Williams Bowers website can be accessed at www.hwbhk.com.