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The Collection of Levy on Insurance Premium by IA - Frequently Asked Questions

The Collection of Levy on Insurance Premium by IA - Frequently Asked Questions

1. What is Insurance Premium Levy?
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.

2. What is IA?
“IA” is known as 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.

3. Why do I need to pay the levy?
According to Financial Services & the Treasury Bureau, while $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.

4. When will the levy become effective?
The new levy will come into effect on 1st January 2018. All premium amounts are subject to levy at the applicable rate (please refer to Question 5).

5. How is the levy calculated?
The collection of levy will be in an incremental approach after its establishment as to minimize its impact on the policyholders. The levy rate will start at 0.04% from January 2018 and increase gradually on a yearly basis like 0.06% from April 2019, and then 0.085% from April 2020, until it reaches the target level of 0.1% in April 2021 and onwards.

6. Is there a maximum limit on the premium levy?
A cap would be imposed on the levy on general insurance policies with annual premiums at or above $5 million.


Policy Inception Date or the renewal of such date 1.1.2018 - 1.3.2019 1.4.2019 - 31.3.2020 1.4.2020 - 31.3.2021 From 1.4.2021 onwards
Cap (HK$) 2,000 3,000 4,250 5,000




 


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

8. Is the insurance policy or coverage affected by the levy?
Product coverage under the insurance policy will not be affected by the levy.

 


9. Is the levy included in the premium shown in the policy schedule and renewal notice?
The levy is shown as a separate item in the policy schedule and renewal notice.

For more details, please refer to IA’s official website: www.ia.org.hk/en/levy

 
        
   
 
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