The Hong Kong Insurance Authority (IA) has released its March 2025 edition of Conduct In Focus, offering insights into recent industry trends, regulatory priorities, and data on complaints and professional development compliance.
A central feature of this issue is the growing prominence of the managing general agent (MGA) model in Hong Kong’s insurance market.
Rising Popularity of the MGA Model
The IA has observed an increase in license applications and inquiries, signaling a heightened market interest in the MGA model. Unlike traditional agency structures, MGAs are empowered to carry out key functions, such as underwriting and claims handling, on behalf of insurers.
Although the IA does not dictate market trends, it noted that the increasing adoption of technology is likely contributing to the model’s resurgence. Digital entrepreneurs are leveraging MGA licenses to build insurance solutions, offering services such as policy and claims administration. This approach provides insurers with operational flexibility while minimizing the need for significant internal investments.
Furthermore, insurers are exploring MGAs as a means to enter specialized markets, such as cyber insurance, by utilizing external underwriting expertise. Some insurers are also integrating MGA structures to combine advisory services with tailored insurance products, enhancing risk mitigation for clients.
Regulatory Oversight and Governance Concerns
The IA has raised concerns about the potential risks associated with separating decision-making authority in underwriting from the financial responsibility for carrying the risk. In MGA arrangements, commissions based on policy volume may encourage volume-driven behavior over prudence, particularly if regulatory oversight is insufficient.
Drawing lessons from past financial crises and citing a 2024 AM Best report on U.S. solvency challenges, the IA emphasized that a heavy reliance on MGAs without strong governance mechanisms could precede financial distress for insurers.
As part of its regulatory oversight, the IA prioritizes the review of MGA license applications, focusing on the qualifications of responsible officers, the terms of insurer-agency agreements, and the internal controls that support compliance and risk management. The IA also enforces its Guideline 14 on Outsourcing (GL14), which requires insurers to conduct thorough due diligence, monitor service performance, and maintain business continuity plans when delegating functions to MGAs. In cases where such delegation is deemed material, insurers must inform the regulator in advance.
Complaint Trends and Intermediary Turnover
In 2024, the IA recorded 978 complaints, maintaining a similar volume to 2023. The majority of these complaints were related to issues of “conduct,” including unlicensed selling, twisting, and mishandling of client funds, as well as challenges in claims processing and policy presentation. A slight uptick in complaints concerning travel claims was also noted.
The IA continues to express concern over the high turnover rate among new insurance intermediaries, particularly in the life sector, which often leads to orphaned policies and service disruptions for clients.
Compliance with Continuing Professional Development (CPD)
The IA reported a near-total compliance rate of 99.9% for Continuing Professional Development (CPD) among licensed intermediaries during the 2023/24 assessment period, marking significant improvement since the introduction of formal non-compliance tracking in 2021.
In addition to its ongoing supervisory work, the IA conducted thematic reviews, joint inspections with the Hong Kong Monetary Authority on premium financing, and workshops focused on corporate ethics for insurance executives.
Looking Ahead
As the Hong Kong insurance market continues to evolve, the IA remains focused on monitoring emerging business models, particularly those driven by technology, such as MGAs. The authority’s regulatory priorities will continue to emphasize risk accountability, compliance, and the protection of policyholders within the sector.
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