The Hong Kong Insurance Authority is set to introduce new rules governing asset-intensive reinsurance, aiming to give clear guidance to firms in one of the market's fastest-growing niches, Bloomberg reported on Monday, citing people familiar with the matter.
The insurance regulator has been consulting the industry on the proposed rule in recent months, with new additions set to target asset-intensive reinsurance explicitly for the first time, the report said.
Asset-intensive reinsurance allows insurers to offload the management of their insurance products' assets and risks to a third party, which can deploy the funds elsewhere in pursuit of higher returns. The reinsurance market has attracted global attention in recent years, with KKR and Apollo Global Management among the firms striking multi-billion-dollar deals.
The proposed rules would see insurers in Hong Kong either notify the regulator or seek approval for asset-intensive reinsurance deals, based on the scenario, according to the report.
Insurers would only need to notify the regulator instead of obtaining explicit approval if the reinsurer's credit rating exceeds a certain threshold and the reinsured assets are immaterial compared with the insurer's long-term liabilities, the report said.
Transactions still requiring approval would be assessed based on factors including credit rating, collateral and legal enforceability, it added.
In response to inquiries from Bloomberg, the IA said the consultation has ended, and it is reviewing the feedback, with the revised guideline expected to take effect next year.
