Manulife pulls loan product for rich Hong Kong clients after scrutiny
The US$80 million policy uses 4 times leverage to offer over 10% returns to wealthy buyers
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[HONG KONG] Manulife Financial pulled leverage for an insurance product targeting wealthy Hong Kong clients after the offering drew scrutiny from regulators and competitors, according to people familiar with the matter.
The product pitched by the Canadian insurer allowed wealthy individuals to buy a policy worth US$80 million in nominal value with almost four times leverage and offered returns exceeding 10 per cent, according to marketing materials seen by Bloomberg News.
Manulife’s clients required an initial investment of US$14.4 million for the product, with an additional US$56 million borrowed at a fixed interest rate of 3.39 per cent for five years. By comparison, market lending rates on other policy loans currently available to retail customers hover around 7 per cent.
While premium financing, or borrowing against the value of a life insurance policy, is a common practice for high-net-worth individuals, this specific programme stood out because of its aggressive leverage and unusually low financing costs, according to people familiar with the matter, who asked not to be identified discussing private information.
A spokesperson for Manulife said the company regularly reviews its policy services and makes adjustments as part of its routine operations, adding that it remains committed to meeting customer needs.
Aggressive structures have caught the attention of the city’s insurance watchdog.
Asked about the product, Insurance Authority chief executive officer Clement Cheung said that the regulator doesn’t comment on individual cases.
More broadly, he said the regulator has noticed “some premium financing and relatively creative financial arrangements in the industry” and remains focused on protecting policyholders’ interests.
Regulators have previously sounded the alarm over premium financing. The watchdog has warned consumers that final returns can fall short of projections, while cautioning against unexpected interest costs and the risk of heavy losses in the event of an early surrender.
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The insurance watchdog capped the so-called illustration rate of return at 6.5 per cent for non-Hong Kong dollar denominated policies starting from July 2025. Hong Kong-dollar policies can market their returns at maximum 6 per cent.
While the cap aims to “maintain realistic expectations for policy holders” at the point of sales, insurers can still pay dividends beyond the stated figure, the authority has said.
The suspension at Manulife comes amid a broader, coordinated crackdown on cross-border wealth channels. Chinese authorities have tightened the screws on domestic brokers, and Hong Kong lenders have intensified scrutiny over new bank accounts opened by mainland visitors.
Capital flight into the city’s insurance sector has long been a key revenue driver for international insurers and private banks tapping the mainland’s wealthy elite.
In 2024, new premiums generated from mainland visitors reached HK$62.8 billion, capturing nearly 29 per cent of Hong Kong’s total insurance market. The regulator last year halted the publication of sales statistics for mainland Chinese visitors, citing the need to “conduct a comprehensive review of the scope and criteria concerning data collection on non-local policyholders”.
The authority is simultaneously intensifying oversight on insurance firms attempting to bypass recent restrictions on broker fees and policy rates. Regulators have detected signs that some market players are actively circumventing compliance rules introduced last year to eliminate unrealistic return projections, unsuitable sales tactics, and outsized commission payouts.
Despite regional regulatory hurdles, high-net-worth demand for massive policies remains robust. Earlier this year, Manulife’s Singapore unit sold a US$300 million life insurance policy, overtaking the threshold certified by Guinness World Records as the most valuable single life insurance policy ever issued. BLOOMBERG
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