IA warns of risks in premium financing amidst rate hikes

Hong Kong’s Insurance Authority (IA) cautioned that premium financing, whilst offering potential benefits, carries inherent risks, particularly in periods of rising interest rates.

- 

“In the past era of low-interest rates, through premium financing, policyholders may benefit from the spread between their policy returns and bank loans while also amplifying their returns through leveraging. However, this would in turn magnify the risks and potential losses,” Marty Lui, head of Long Term Business (Acting) of the IA said in an announcement.