Hong Kong’s Insurance Authority (IA) is weighing new rules for asset-intensive reinsurance, Bloomberg reported, citing people familiar with the matter.

The rules would give firms clearer guidance in one of the busiest areas of insurance.

In recent months, the IA has asked the industry for views on the changes. The people said some of the changes would target this area directly for the first time.

The IA told Bloomberg its consultation has closed. It is now studying the feedback and expects the revised guideline to take effect in 2027.

Under the plan, the people said, insurers would either inform the IA of a deal or seek its approval.

A third-party deal would need only a notice if two tests are met. First, the reinsurer’s credit rating must be above a set level.

Second, the insurer’s total reinsured assets must not be material compared with its long-term liabilities.

If not, the IA would look at factors such as collateral, credit rating and whether the contract can be enforced.

In this type of deal, an insurer passes a block of assets and liabilities to another firm. That firm can then invest the money to seek higher returns.

While this can help insurers, it also adds risk. Reinsurers are now large buyers of private credit. That market has worried investors after years of fast growth.

Featured image: Edited by Fintech News Hong Kong, based on image by 4045 and mohammadhridoy_11 via Magnific.