The IA, which officially launched in June 2017, will start collecting the levy from holders of all new or in-force life insurance policies and general insurance policies from next year.
The aim behind the levy is to ensure that the new insurance regulator can be self-funded.
The rate will start at 0.04% of the insurance premium per policy year and increase each year until it hits 0.1% in April 2021.
The levy will be collected by the IA via the insurance companies.
“As an insurance regulator independent of both the government and the industry, the IA has to be financially independent and recover its operating costs in the long run,” said John Leung, chief executive of the IA.
“The IA will manage its financial resources prudently and mitigate the impact on policy holders by adopting an incremental approach in imposing the premium levy.”
Limitations have been imposed on the maximum amount payable by life and general insurance policyholders.
In Phase one, for life insurance policies with single or annualised premiums at or above HK$100,000, policyholders will pay only $40 at most per policy year.
For general insurance policies with annual premiums at or above HK$5m, the cap will be $2,000 per policy year.
Exemptions and clarifications
Group life insurance policies with medical protection offered by employers will be subject to the cap for general insurance policies.
However, reinsurance business, policies underwritten by authorised captive insurers. And marine, aviation and goods-in-transit business are exempt from the levy.
Failure to pay
If a policyholder does not pay the levy, the IA may impose a penalty of up to HK$5,000 and may recover the outstanding levy as a civil debt.