Segregation of Hong Kong Assets - Impacts Hong Kong Designated Policyholders
29 Jul 2024
We, Friends Provident International Limited ("FPIL"), are writing to policyholders that we classify as “Hong Kong designated policyholders” to inform them of changes that are happening as a result of our regulatory requirements in Hong Kong.
Upcoming changes to policies
Under our Hong Kong regulatory obligations, details of assets held within a FPIL policy where the policy application was processed through our Hong Kong branch are reportable to the Insurance Authority of Hong Kong (the “IA”). The principal function of the IA is to regulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and for the protection of existing and potential policyholders.
Who we classify as a Hong Kong designated policyholder
We have two categorisations of Hong Kong designated policyholder that are captured by the upcoming changes:
- Hong Kong Offshore designated policyholders - These are policyholders who did not sign their FPIL policy application in Hong Kong, however, their policy was processed through our Hong Kong branch. They can invest in SFC and non SFC-authorised funds.
- Hong Kong Onshore designated policyholders - These are policyholders who signed their FPIL policy application in Hong Kong and their policy was processed through our Hong Kong branch. They invest in a product which is a Investment-Linked Assurance Scheme that is authorised by the Securities and Futures Commission regulator in Hong Kong and therefore can can only switch between, and invest premiums into, SFC-authorised funds.
Note that a policyholder does not need to be resident in Hong Kong to be categorised as a Hong Kong designated policyholder; it is based on where the application for a FPIL policy was processed, i.e. our Hong Kong branch.
The segregation of assets
In line with the changing regulatory landscape in Hong Kong, it will become a regulatory requirement for our company to separate the assets of our insurance business carried on in or from Hong Kong (for any Hong Kong designated policyholder), from the assets of our insurance business carried on in or from other jurisdictions.
How we will carry this out
As the FPIL mirror funds available to Hong Kong designated policyholders are also available to non-Hong Kong policyholders, to assist with internal accounting and segregation purposes we will be separating the mirror funds into two ranges. One will be exclusively for investment from our Hong Kong designated policyholders (the “Hong Kong mirror funds”) and one for investment from other jurisdictions. The Hong Kong mirror funds will be a replica of the current mirror funds available to policyholders, with the same names, investment objectives and charging structure, however, they will be given new fund codes to differentiate them. We will only accept investment into the Hong Kong mirror funds from Hong Kong designated policyholders.
Moreover, in order to segregate the assets, we will operate trading accounts and custody accounts with our safekeeping custodian, Allfunds Bank, specifically for the Hong Kong mirror funds.
What changes will be seen on policies
The Hong Kong mirror funds will only become available for investment on 25 November 2024.
In order to implement the asset segregation, on 25 November 2024 (the “Switch Date”), current holding(s) will be switched, and any regular future premiums allocation redirected (where applicable), from the current mirror funds into the corresponding Hong Kong mirror fund(s). Policyholders will see an equivalent value switched from their current holding(s) into the corresponding Hong Kong mirror fund(s) on their policy. This may take up to five working days to be visible on their policy through the FPI Portal.
Policyholders will not be disadvantaged by the switch of holding(s) into the corresponding Hong Kong mirror fund(s) and no charges will occur as a result of the switch.
Please note that some funds cannot be switched as part of the asset segregation due to their status; this includes mirror funds with Russian assets that are currently suspended to trading. Any units in these continue to be priced at zero during the suspension and will remain in the current mirror fund version.
Policyholders do not need to take any action as a result of this notification as the changes detailed above will happen automatically in their policy.
For details of the current mirror funds and the corresponding receiving Hong Kong mirror funds for each Hong Kong designated policyholder type, please refer to the Appendix in the relevant sample client communications opposite.
Switches and regular premium redirections
Until the Switch Date, policyholders are free to switch from existing mirror fund(s), and/or to redirect future regular premiums (if any), to a different mirror fund in the current range should they wish. This can been done, without charge, by completing a Switch/Redirection instruction form and returning it to us, a copy of which is available on request.
Following the Switch Date policyholders will continue to have the option to switch at any time, free of charge, within the designated Hong Kong mirror fund range.
Our Rest of World fund centre will be updated on 25 November 2024 to direct Hong Kong Offshore policyholders and advisers to the correct fund range.
Hong Kong Onshore policyholders should continue to visit our Investment-linked funds page on our Hong Kong website - available in English or Chinese language - for the current fund range available.
We recommend policyholders seek the advice of their usual financial adviser before making any investment decisions.
Should you have any questions regarding these changes, please contact the Investment Marketing Team.
