As Hong Kong regulators continue tightening oversight of insurance intermediary remuneration, attention has now turned to banks that are also insurance intermediaries, with new commission-spreading requirements applicable to the sale of participating policies.
On 5 June 2026, the Hong Kong Monetary Authority (HKMA) issued a circular to all Authorised Institutions (AIs) setting out its new regulatory expectations for the remuneration structures of AIs that act as licensed insurance intermediaries–a move specifically tailored for the bancassurance channel. This circular effectively brings banks selling participating policies in line with remuneration reforms already imposed on insurers and insurance intermediaries.
The HKMA’s guidance follows the Insurance Authority’s (IA) Practice Note on Remuneration Structures of Authorized Insurers for Licensed Insurance Intermediaries for Participating Policies (IA Practice Note) issued in July 2025. This development forms part of the broader regulatory focus on remuneration structures, which we discussed in our previous legal update on the IA’s 50% cap on referral fees for participating policies.
Notably, the HKMA requires commissions arising from participating policies with regular payment terms to be spread over at least five years. For policies issued on or after 1 July 2028, no more than 70% of the total commissions may be paid upfront at both the institutional and individual representative levels.
What are the requirements on remuneration structures?
- Commission spreading requirements at institutional-level
For any participating policy with regular payment terms, commission received by an AI from an authorised insurer must be prorated over time, subject to a two-stage phase-in:
- Policies issued on or after 1 July 2027:Upfront commission (received upon sale and during the first policy year) is capped at 85% of the total commission receivable
- Policies issued on or after 1 July 2028:The upfront commission cap tightens to 70%
- Remaining commission:The remaining commission must be received evenly over a minimum of five years (policy years two to six) or the premium payment term, whichever is shorter
For completeness, certain bonus commissions may be exempt from the spreading requirements, provided entitlement is not solely determined based on business volume and is linked to objective non-financial performance evaluation of compliance with and adherence to the “treating customers fairly” principle.
- Spreading of commission income for appointed technical representatives (individual level)
The spreading requirements also extend to the commission income of an AI’s appointed technical representatives. For policies issued on or after 1 July 2028:
- No more than 70% of an individual’s total commission income from a participating policy may be paid upfront
- The remaining income must be paid evenly over at least five years or the premium payment term, whichever is shorter
Recognising that many AIs use balanced scorecards or similar approaches to determine frontline staff remuneration, the HKMA provides an exemption from the individual-level spreading requirements, provided two criteria are met:
- No separate commission income component: The HKMA adopts a “substance-over-form” approach, meaning that any remuneration element that is, in substance, commission-based will be subject to the spreading requirements regardless of its label or form
- Adequate non-financial performance evaluation: The scorecard must contain factors that allow an adequate assessment of the representative’s performance against the “treating customers fairly” principle
If an exempted scorecard is found to be non-compliant, the individual’s entire remuneration will be subject to the spreading requirements. AIs are encouraged to begin migrating their systems early and must maintain robust controls, procedures and records to demonstrate compliance to the HKMA upon request.
Conclusion
The extension of the commission-spreading requirement marks a significant step toward closing a regulatory gap between insurers and bancassurance distributors. It confirms that banks and their staff will be expected to meet the same standards as other insurance intermediaries in aligning remuneration incentives with policyholders’ long-term interests.
The HKMA has confirmed it will continue to work closely with the IA to monitor bancassurance remuneration practices. AIs should therefore treat the circular not as a one-off compliance exercise, but as part of a continuing supervisory focus on the way insurance products are distributed through the banking channel. In practical terms, AIs should start early by reviewing both institutional and individual remuneration structures, identifying any hidden or disguised commission components and strengthening their governance, monitoring and record-keeping arrangements. Given the regulators’ substance-over-form approach, AIs should also ensure that their methodology and controls are robust enough to detect, track and remediate any compliance gaps.
