Hong Kong’s Insurance Authority (IA) is seeking to build the city’s position as a captive insurance domicile for corporates, using regulatory measures and engagement with Mainland Chinese and multinational sponsors.

Beijing forum examines captives in group risk management

On April 9, the IA held its latest Captive Forum in Beijing, with close to 100 participants from enterprises, captive insurers, (re)insurers, and professional service firms from Mainland China and Hong Kong. Discussion centred on how captive structures are being applied in enterprise risk management and capital planning, particularly for groups with overseas operations. In his opening remarks, Clement Lau (pictured), executive director for policy and legislation at the IA, linked corporate interest in captives to shifts in the external risk environment and the impact of new technologies. “The ever-increasing complexity of external risks, coupled with the rapid development of new technologies, compels enterprises to adopt a more holistic and autonomous approach to risk management, which captive insurance can effectively support,” Lau said.

Lau also set out how the regulator sees Hong Kong’s role for Mainland sponsors. “With one of the most open insurance markets in the world, Hong Kong is an ideal domicile for Chinese Mainland enterprises to establish captives. The IA will spare no effort in fostering a robust captive ecosystem by advancing facilitative policies, as well as attracting talents and strengthening related professional services,” he said. Panel sessions at the forum looked at three main topics:

The use of captives to support enterprises expanding abroad
The consolidation of group risks before and after captive formation
The way captives interact with commercial insurance and reinsurance markets

Speakers outlined practical considerations such as programme design, fronting arrangements, access to reinsurance, and how captives are being integrated into insurance portfolios.

CNNC Captive authorisation adds to Hong Kong’s captive pool

The Beijing event followed a recent authorisation in Hong Kong’s captive sector. On March 3, the IA approved CNNC Captive Insurance Limited, a captive formed by China National Nuclear Corporation (CNNC), as a Hong Kong-domiciled insurer. CNNC Captive is structured to insure risks within the CNNC group in line with Hong Kong’s regime for group-owned general insurers. The decision is the IA’s first captive approval of 2026 and brings the number of captives domiciled in Hong Kong to seven.

“Captives have already become a major component of enterprise risk management for global business corporations. We are encouraged by formation of the CNNC Captive Insurance Limited and will actively develop potential opportunities in the Chinese Mainland as well as other parts of Asia, introducing to stakeholders the unique value proposition of Hong Kong,” IA chief executive officer Clement Cheung said in a statement on the authorisation. The IA has incorporated captives into its oversight of regional corporates and cross-border groups, treating them as one element in how organisations structure risk retention and line up reinsurance support.

Mainland corporates and multinationals broaden sponsor mix

CNNC Captive follows other recent captive formations that use Hong Kong as their domicile. In August 2025, the IA authorised SAIC Motor Insurance Limited, a captive established by SAIC Motor Corporation Limited and the second captive approval that year. In May 2025, HSBC Group set up Wayfoong (Asia) Limited, which IA records describe as the first Hong Kong captive sponsored by a multinational enterprise. These entities sit alongside captives owned by Mainland state-owned enterprises and industrial groups in sectors such as energy, manufacturing, and infrastructure. Sponsors generally use the vehicles to assume defined portions of group risk, retain those exposures within the group balance sheet, and apply consistent coverage structures across business units and territories. The presence of these captives has led to increased use of specialist services in Hong Kong, including fronting solutions, reinsurance placements, risk advisory work, and alternative risk transfer structures for corporates with operations across multiple Asia-Pacific markets.

Regulatory and tax framework for captive insurers

Hong Kong’s approach to captives is set out in the Insurance Ordinance (Cap. 41). Under section 2(7), a captive insurer is defined as a company authorised to write general insurance business only, subject to specific limitations. Captives are not permitted to write statutory compulsory insurance classes and are restricted to risks that fall within, or have a close link to, the sponsoring corporate group. Permitted business includes insurance and reinsurance of risks of entities within the group, proportional shares of risks to which the group is directly exposed, and other risks over which the group has control, oversight, management, or a sufficient connection. In practice, this confines captives to intra-group exposures rather than open-market retail or broader commercial business.

Capital requirements for captives are set under the Insurance (Marine Insurers and Captive Insurers) Rules (Cap. 41U). The prescribed capital amount is calculated using a simplified method based on net premiums or relevant claims outstanding, with a minimum capital base of HK$2 million. By comparison, general business insurers fall under the risk-based capital framework in the Insurance (Valuation and Capital) Rules (Cap. 41R), which takes account of market, insurance, counterparty default, other and operational risks and requires a minimum capital base of HK$20 million.

Captives also benefit from several regulatory concessions. They are exempt from the onshore asset maintenance requirement that applies to non-Hong Kong general insurers with Hong Kong risks. They are not required to appoint a certifying actuary. For key persons in control functions, the IA operates a notification-based regime, with the regulator informed after an appointment rather than giving prior approval. From a tax perspective, Hong Kong grants a 50% profits tax reduction on insurance business of offshore risks written by captive insurers, effective from the 2013/14 year of assessment. According to government policy, the measure is designed to encourage both local and overseas groups to establish captives in the jurisdiction.