Under the Hong Kong regulatory regime, investment-linked assurance schemes (ILAS), which are also commonly known as “unit-linked insurance policies”, and their investment options must seek authorisation from the Securities and Futures Commission (SFC) prior to being offered to retail investors in Hong Kong. ILAS issuers, being insurance companies, are under the prudential regulation of the Insurance Authority. The SFC is involved in the regulation of ILAS only to the extent that certain ILAS documents may need to be authorised by the SFC prior to their issuance in Hong Kong. ILAS offering documents must comply with the disclosure requirements in the SFC's Code on Investment-linked Assurance Schemes (ILAS Code).
Under the ILAS Code, an authorised ILAS must issue an offering document which includes a Product Key Facts Statement (KFS), and a personalised Illustration Document based on the prescribed format on the SFC's website. The KFS must describe the ILAS, but does not need to cover details of the underlying investment options. The Illustration Document must show, among other things, the encashment values if investors surrender the policy prior to maturity. ILAS advertisements must be pre-vetted by the SFC and comply with the Advertising Guidelines.
When applying for SFC authorisation, an Application Form, Information Checklist and the KFS Checklist should be completed. These forms and checklists are available from the SFC's website. In general, applications of new ILAS and new investment options are subject to application fees. A fee waiver may be granted by the SFC for an investment option if it is linked to an SFC-authorised retail fund.
An ILAS may contain more than one investment option. Some ILAS offer investment options linked to SFC-authorised funds as well as other portfolios that are internally managed by the insurance company on a discretionary basis. However, we understand that recently the SFC has only authorised investment options linked to SFC-authorised funds. Issuers who intend to offer an ILAS scheme with an “open architecture”, i.e. an ILAS with an open platform of investment choices which can be linked to any authorised retail funds or other asset classes (e.g. bonds), should consult the SFC prior to making an application.