The Hong Kong Insurance Authority (IA) has released the March 2025 issue of “Conduct In Focus”, spotlighting industry developments, regulatory oversight themes, and the latest data on complaints and professional development compliance.
A primary feature of this edition is a review of the rising use of the managing general agency (MGA) model in Hong Kong.
The IA has observed a growing number of license applications and enquiries indicating market appetite for this delegated authority model, which differs from traditional agency structures by empowering MGAs to perform key functions – such as underwriting and claims handling – on behalf of insurers.
Although the IA does not prescribe market trends, it noted that technology adoption may be influencing the MGA resurgence.
Some digital entrepreneurs are opting to build insurance solutions using agency licenses to deliver core services such as policy and claims administration. These arrangements can offer insurers operational flexibility without requiring significant internal investment.
The regulator also acknowledged that some insurers are exploring MGAs as a way to enter specialty lines, like cyber insurance, by leveraging external underwriting expertise. Others are using MGA structures to integrate advisory services with tailored insurance offerings for risk mitigation.
The IA cautioned that separating the decision-making authority for underwriting from the financial responsibility of carrying the risk can lead to misalignment.
In MGA arrangements, commissions earned per policy may incentivise volume over prudence, especially if oversight mechanisms are inadequate.
Referencing lessons from past financial downturns and a 2024 AM Best report on US solvency issues, the IA pointed out that heavy reliance on MGAs without robust governance has, in some cases, preceded insurer distress.
As a result, when reviewing MGA license applications, the IA prioritises assessments of the responsible officer’s qualifications, the insurer-agency agreement terms, and the internal controls supporting compliance and risk oversight.
The IA also applies its Guideline 14 on Outsourcing (GL14), which mandates that insurers delegating functions to MGAs conduct due diligence, monitor service performance, and maintain business continuity plans. In cases where the delegation is deemed material, insurers must notify the regulator in advance.
In 2024, the IA recorded 978 complaints, largely consistent with 2023 figures. The majority were classified under “conduct” – including unlicensed selling, twisting, or improper handling of client funds – followed by issues related to claims processing and the presentation of policy information. A slight increase in complaints tied to travel claims was observed.
The IA also highlighted continued concerns over the high turnover rate among new insurance intermediaries, particularly in the life sector, which could lead to orphaned policies and service disruptions for customers.
Separately, 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. This represents a notable improvement since the introduction of formal non-compliance tracking in 2021.
The regulator also conducted thematic reviews, joint inspections with the Hong Kong Monetary Authority on premium financing, and workshops focused on corporate ethics for insurance executives.
As the Hong Kong insurance sector continues to evolve, the IA is expected to maintain a close watch on new business models, especially those involving technology-driven MGAs. Its supervisory priorities will remain focused on ensuring risk accountability, regulatory compliance, and policyholder protection across the industry.
