Hong Kong’s Insurance Authority (IA) has closed a public consultation on revisions to the city’s Risk-based Capital (RBC) framework, outlining a series of rule changes that would alter how insurers calculate capital requirements across infrastructure investments, general business lines, and digital asset holdings. The regulator published its consultation conclusions on May 8, drawing on feedback gathered since February 2026, when draft amendments to the Insurance (Valuation and Capital) Rules (Cap. 41R) were circulated for industry review. Responses broadly backed the direction of the proposals, though several areas – including the geographic boundaries of eligible investments and the granularity of reduction factors – drew substantive comment. A Dec. 31, 2026, implementation date has been set, pending negative vetting by the Legislative Council.

What changes for infrastructure investors

At the core of the amendments is a preferential capital treatment for insurers that deploy funds into qualifying infrastructure assets. The IA framed the measure as a tool to channel private capital toward projects in Hong Kong and the Chinese Mainland, including the Northern Metropolis development corridor, as well as assets with a demonstrable connection to Hong Kong. Industry respondents pushed back on what some perceived as overly narrow geographic constraints. A portion of submissions called for the eligibility perimeter to be widened to encompass global infrastructure opportunities, arguing that a broader scope would give Hong Kong-based carriers access to deeper pools of investable assets. Others questioned whether private placements qualified under the “issued in Hong Kong” criterion, suggesting the language implied a public listing requirement.

The IA rejected both arguments. On geographic scope, the regulator maintained that a clear distinction in capital treatment is necessary to serve the policy goal of directing investment toward specific locations, and that diluting this distinction would undermine the framework’s intent. On private placements, the IA said the assumption that “issued in Hong Kong” applies only to publicly listed instruments is a misconception – private placements are included – and indicated that a forthcoming guideline would elaborate further.

Reduction factor calibration also drew considerable feedback. The IA confirmed that it will revise the parameter governing capital relief for insurers holding Hong Kong dollar-denominated government infrastructure bonds, tying it to an insurer’s holdings of such bonds relative to its total Category A eligible infrastructure investments, and applying it across both credit spread and equity risk charges. Additionally, the IA said it will raise reduction factors for Category A infrastructure debt and unlisted equity, responding to calls from some respondents for more favourable treatment of illiquid instruments.

General insurers brought into the fold

One of the more consequential shifts in the final rules is the extension of infrastructure-related capital relief to general insurers – a change not included in the original February draft. Several respondents had argued that long-tail general business lines face similar asset-liability duration mismatches as life insurers and should therefore have access to the same incentives for holding long-dated infrastructure assets. The IA agreed, and the relevant clause will be updated to reflect the expanded scope. On other general business amendments – covering natural catastrophe risk, man-made catastrophe risk, reserve risk, and correlation factors – most respondents raised no objections. A portion sought clearer guidance on when insurers may substitute their own estimates for the standard limit-of-cover metric, and the IA said additional guidance will be issued.

Offshore reinsurance carve-out draws scrutiny

The consultation also addressed a proposal to let qualifying Hong Kong insurers exclude assets and liabilities tied to their offshore general reinsurance portfolios from their Prescribed Capital Amount calculations, subject to IA approval. The measure is aimed at carriers that belong to non-Hong Kong insurance groups. Not all respondents were in favour. One raised concerns that the arrangement could facilitate regulatory arbitrage or leave entities under-capitalized, while another argued the benefit should be available to locally headquartered carriers as well. The IA held its position on the scope of the proposal, pointing to comparable frameworks in peer jurisdictions, and stated that any approved exclusion would be conditional on group-level capital adequacy and other safeguards. Details on the approval process will be laid out in a subsequent guideline.

Digital asset treatment formalized

The finalized rules bring greater regulatory definition to the treatment of digital assets on insurer balance sheets. On stablecoins, the IA confirmed a look-through approach for calculating risk capital requirements, with a separate overlay charge for counterparty default exposure. For crypto assets more broadly, the regulator will proceed with a framework that brings them onto the capital base while applying a 100% downward stress factor with no diversification benefit against other risk modules. Although a minority of respondents preferred the existing practice of keeping crypto assets off the capital base entirely, the IA noted that its approach is consistent with evolving standards in banking regulation and the European Solvency II regime. A point of ambiguity around tokenized assets – digital representations of conventional financial instruments such as bonds and equities – will be resolved through a direct amendment to the definition of crypto assets in rule 2 of the RBC Rules. The revised text will state explicitly that such tokenized instruments fall outside the crypto asset definition.

Countercyclical buffer mechanism refined

The IA will also proceed with changes to the countercyclical adjustment mechanism, which moderates the sensitivity of capital requirements to market fluctuations. The revision grants the regulator authority to set the mechanism’s cap and floor values through a Gazette notice rather than through the rules themselves, providing greater administrative flexibility. A proposal to make the mechanism optional was not adopted, with the IA citing broad respondent support for mandatory application and consistency with international capital standards. With the consultation period concluded, the IA will submit the final amendment package, together with the draft Insurance (Maintenance of Assets in Hong Kong) (Amendment) Rules 2026, to the Legislative Council. If the negative vetting process proceeds without objection, the revised framework is set to take effect by the close of 2026.