Keynote Speech by Mr Clement Lau, Executive Director, Policy and Legislation, at Actuarial Society of Hong Kong (ASHK) and the Institute and Faculty of Actuaries (IFoA) Joint Conference

This document is a summary of the keynote speech delivered by Mr. Clement Lau, Executive Director (Policy and Legislation) of the Insurance Authority (IA), at the ASHK and IFoA Joint Conference on 16 July 2026.

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The speech outlines the evolution of the Insurance Authority’s regulatory philosophy following the full transition to the Risk-based Capital (RBC) regime in July 2024. It shifts the regulatory focus from a traditional, defensive, and "gatekeeper" model toward a proactive "ecosystem enabler" model. The core purpose is to mobilize "patient capital" to support Hong Kong’s strategic role in the national "dual circulation strategy" while maintaining prudential safety.

• Shift in Regulatory Philosophy: The IA is moving away from purely risk-averse, static supervision toward a dynamic framework that balances financial stability with market development.
• Mobilizing Patient Capital: Insurers hold long-duration liabilities, making them ideal vehicles for long-term investments. The IA aims to reduce "capital drag" on infrastructure assets to encourage long-term economic support.
• RBC Review Outcomes: Based on the first full cycle of regulatory returns, the IA has refined the Pillar 1 framework to better align with the economic substance of long-term assets and specific insurance lines.
• Holistic Market Enablement: Beyond infrastructure, the IA is focusing on the growth of Insurance-Linked Securities (ILS), marine specialty risks, the captive insurance ecosystem, and the adoption of Artificial Intelligence (AI).

• Infrastructure Asset Treatment: Under the original 2024 Pillar 1 framework, infrastructure assets were treated similarly to general corporate debt or equity. The updated framework introduces preferential capital treatments for:
• Eligible infrastructure investments in Hong Kong or the Chinese Mainland.
• Eligible infrastructure assets listed or issued in Hong Kong.
• Infrastructure bonds issued by the Hong Kong SAR Government.
• Technical Adjustment: A designated reduction factor is applied to relevant risk charges under Pillar 1 for eligible infrastructure assets (e.g., energy, transportation, healthcare).
• General Business Relief: Refinements have been implemented to reduce risk capital requirements for general business and provide dedicated relief to offshore general reinsurance business.

• July 2024: Original transition to the Risk-based Capital (RBC) regime.
• 16 July 2026: Date of the speech (confirming the review of the RBC regime has been completed).

• Applicability: All authorized insurers operating under the Hong Kong RBC regime.
• Affected Institutions: Insurance companies holding long-term infrastructure assets, entities engaged in offshore general reinsurance, and conglomerates utilizing or considering captive insurance facilities.
• Impact Level: High. These changes provide direct capital efficiency improvements for insurers, enabling them to reallocate capital toward long-term strategic assets without compromising prudential safety margins.

• Operationalization: Insurers are required to critique, stress-test, and operationalize the new risk-calibration changes within their own Asset-Liability Management (ALM) frameworks.
• Professional Standards: Actuaries must ensure the technical application of the new reduction factors follows the updated regulatory guidelines while maintaining professional integrity.
• AI Compliance: For firms participating in the AI Cohort Programme, firms must balance the adoption of new technologies with the IA’s requirements for "responsible AI adoption" and "robust risk management."

• Risk-based Capital (RBC) Regime: A framework quantifying asset and underwriting risks with precision.
• Pillar 1: The specific section of the RBC framework dealing with quantitative capital requirements, now modified to include "reduction factors" for infrastructure.
• Patient Capital: High-quality, long-term institutional capital derived from insurance funds that can be deployed into multi-decade structural projects.
• Asset-Liability Management (ALM): The core actuarial practice of matching the timing and nature of asset cash flows with long-tail insurance liabilities.
• Insurance-Linked Securities (ILS): A market mechanism for transferring insurance risks (e.g., catastrophe bonds) to capital markets.
• Marine Specialty Risks Pool: An initiative to centralize marine insurance expertise.
• Captive Insurance Ecosystem: A focus on allowing state-owned and private enterprises to establish captive insurers in Hong Kong for global operational risk management.
• AI Cohort Programme: A strategic initiative by the IA to foster collaboration between regulators, market participants, and technology partners regarding AI implementation.

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• ILS Market: Transitioning from basic catastrophe bond issuance to broader alternative risk coverage and enhanced ILS fund trading.
• Captive Insurance: Aggressively expanding the ecosystem for Mainland and multinational enterprises to centralize global risk management in Hong Kong.
• AI Governance: Establishing a "carved-out strategy" to manage the risks and opportunities associated with AI adoption in the insurance sector.