Pre-application checklist for premium financing in Hong Kong: 30 questions to settle before you sign

Key takeaways

Before applying, compute your own leverage ratio (loan divided by liquid assets after a 10% to 50% haircut) and your monthly interest at the benchmark's three-year high; if the ratio exceeds 1 or the interest is uncomfortable, stop.
Ask for the loan as a percentage of day-one guaranteed surrender value and in currency terms, the margin-call trigger ratio, the cure period and the review date, and check they are in the facility letter.
Ask whether the bank can switch the facility to its cost of funds; since 16 Oct 2023 the facility letter must show that discretion with equal prominence.
Ask for the prepayment charge, the default rate, the surrender timetable after default and the cooling-off treatment, and read the IFS-PF and KFS before the policy is issued.
Keep copies of the FNA, IFS-PF, KFS, facility letter, deed of assignment and, later, the release; obtain written confirmation of release from both bank and insurer.

This checklist is written for the week before an application, when the bank has quoted terms verbally and nothing has been signed. It is organised in six parts and thirty items. Each item names the question, the document in which the bank's answer should appear, and the reason it matters. The regulators' own advice, repeated in the HKMA's January 2024 article, is the frame: confirm that the financial information the bank has recorded about you is accurate, ask questions, and do not sign anything you do not understand or disagree with.

Part A: your own numbers

#	Question	Where the answer lives	Why it matters
1	What are my liquid assets, excluding my home and any assets already pledged, after a 10% to 50% haircut?	Your own statements; the FNA	This is the denominator of the leverage ratio; insurers apply the haircut, so you should too
2	Is the proposed loan smaller than that figure?	FNA (most banks display the ratio)	A ratio above 1 is a risk of over-leveraging as the IA defines it; most insurers decline such cases
3	Can I pay the unfinanced premium today without borrowing elsewhere?	Your own cash position	First limb of the affordability test; a loan elsewhere to fund the contribution is an undisclosed liability
4	Can I pay monthly interest at the benchmark's three-year high, not today's reading?	Bank KFS (publishes the high); your budget	Insurers' good practice adds 200 basis points; the KFS high for 1-month HIBOR was 5.66%
5	If the bank demanded full repayment next year, where would the money come from without surrendering the policy?	Your own plan	Third limb of the affordability test; this is the question the leverage ratio approximates
6	Do I already have a policy pledged or assigned anywhere?	FNA declaration	Must be disclosed; insurers check for accumulation of pledged policies

Part B: loan amount and loan-to-value

#	Question	Where the answer lives	Why it matters
7	What is the day-one guaranteed surrender value of the policy, in currency?	Benefit illustration (guaranteed column)	The bank lends against this, not the premium
8	What loan-to-value does the bank apply to it, and does it differ by loan currency?	Facility letter; product page	Published examples: 75% HKD, 80% USD at one bank, 90% illustration at another
9	What is the loan in currency terms and what do I pay?	Facility letter	The financed share of premium is LTV times the surrender-value ratio, not the headline LTV
10	Does the maximum LTV depend on the insurer's credit rating, and what happens on a downgrade?	Facility letter; KFS risk disclosure	Banks reserve the right to cut the limit or call collateral on a downgrade
11	What leverage ratio has the bank computed for me, and has it shown me before I accept?	FNA; HKMA circular requires disclosure before acceptance	Your check on item 2

Part C: pricing and reset

#	Question	Where the answer lives	Why it matters
12	What is the benchmark (1-month HIBOR, 3-month HIBOR, Prime, cost of funds, fixed) and the margin?	Facility letter; KFS	The margin is negotiated once; the benchmark moves
13	How often does the rate re-fix, and how will I be told?	KFS	Monthly for 1-month HIBOR, daily for Prime, each period for cost of funds
14	Can the bank switch the facility to its own cost of funds, and under what clause?	Facility letter, same section as the benchmark formula	Since 16 Oct 2023 this discretion must be shown with equal prominence; if you cannot find it, ask
15	Is there a floor on the all-in rate?	KFS	One bank floors at 0.75%; relevant if HIBOR falls
16	If fixed, for how long, is the rate locked at application, what is the reversion formula and what does early repayment cost?	Fixed-rate KFS	One bank's fixed rate is indicative until processed and charges 2% on early repayment in the fixed period
17	What is the default or overdue rate and the over-limit rate?	KFS	Published levels run from Prime plus 4.75% to 1-month HIBOR plus 6%
18	What is the day-count basis?	KFS	Actual/365 for HKD, actual/360 for USD

Part D: review, margin call and unwind

#	Question	Where the answer lives	Why it matters
19	Is the facility a term loan or a revolving line, and when is the review date?	Facility letter	Most facilities are subject to annual review; a non-renewal is repayable
20	At what loan-to-surrender-value ratio does a margin call trigger, and how many days do I have to cure?	Facility letter	The IFS-PF says the circumstances are "stated in the loan contract"; make sure they are
21	What counts as a cure: cash, pledged deposits, other collateral, partial withdrawal?	Facility letter; bank policy	Partial withdrawal reduces collateral as well as debt
22	After a missed interest payment, how long before the bank surrenders the policy?	Product terms	One bank surrenders after 90 days' overdue interest, 60 days after an unpaid tenor end
23	Can the bank set off my other accounts against the loan?	Facility letter; IFS-PF item 7	Standard term; your deposits with the bank are not ring-fenced
24	If the loan and policy currencies differ, who bears the conversion and when?	Facility letter; IFS-PF item 12	Proceeds must be converted to the loan currency to repay

Part E: repayment and exit

#	Question	Where the answer lives	Why it matters
25	What is the repayment pattern: interest-only with principal at tenor end, annual minimum principal, or on demand?	Facility letter; KFS	One revolving product requires at least 5% of original principal yearly
26	What does part or full prepayment cost on a floating facility, and what notice is needed?	KFS	Examples: free; HK$1,000 per prepayment with a HK$50,000 minimum; seven working days to amend terms
27	What happens on the 21-day cooling-off: is the bank's consent needed, does interest or a fee apply, and how quickly is the net refund returned?	Cooling-off notice (updated for assignment); KFS; HKMA circular	Some banks charge nothing on cooling-off cancellation; others charge interest or a small fee
28	What is the process and timing for release of the assignment once the balance is zero?	Bank and insurer servicing terms	Until released you cannot change beneficiaries or pledge the policy elsewhere

Part F: documents

#	Question	Where the answer lives	Why it matters
29	Have I read and signed the IFS-PF before the policy is issued, ticked the solicitation box truthfully, and either given or declined the facility details?	IFS-PF	The form is mandatory and cannot be opted out of; a whited-out tick box was found in the 2024 inspection
30	Do I hold copies of the FNA, the IFS-PF, the KFS, the facility letter, the deed of assignment and the notice of assignment, and will I obtain written confirmation of release from both bank and insurer at the end?	Your own files	Most complaints are one person's word against the bank's; documents decide them

For Mainland Chinese and other non-resident applicants

Add three items. You must sign the application, the Important Facts Statement for Mainland Policyholders (for holders of a PRC resident identity card) and the IFS-PF in person in Hong Kong. You will be asked for evidence of the source of the unfinanced premium and for an account in Hong Kong from which interest in the loan currency can be debited. Cross-border remittance, foreign-exchange and tax reporting obligations in your own jurisdiction are not covered on this site and require independent advice there. This site carries on no sales or promotion in the Mainland.

How to use the list

Take the facility letter and the KFS and tick each item against a line in the document. An item with no line is a question to put to the bank in writing before signing. An item the bank answers verbally but will not put in writing is a reason to pause. The credit process page explains what the bank is checking on its side; the FAQ answers the questions borrowers most often ask after signing, which is the wrong time.

Sources and dates

Circular on the supervisory standards and key requirements on the use of premium financing to take out long term insurance policies — Insurance Authority (IA) · 2022-04-01
Important Facts Statement – Premium Financing (Annex) — Insurance Authority (IA) · 2022-04-01
Premium Financing Activities for Insurance Policies (HKMA circular on interest rate disclosure) — Hong Kong Monetary Authority (HKMA) · 2023-10-16
Findings from IA-HKMA joint inspection exercise on premium financing (annex) — Insurance Authority (IA) and Hong Kong Monetary Authority (HKMA) · 2024-06-27
Understand Premium Financing Before Taking Out The Loan (inSight) — Hong Kong Monetary Authority (HKMA) · 2024-01-22
Key Facts Statement for Revolving Credit Facility – Premium Financing & Policy Collateralization (Oct 2026) — Hang Seng Bank Limited · 2026-10
Key Facts Statement for Insurance Premium Financing (fixed rate, 16 Oct 2026) — The Hongkong and Shanghai Banking Corporation Limited · 2026-10-16

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Premium Finance Practice Editorial (2026). “Pre-application checklist for premium financing in Hong Kong: 30 questions to settle before you sign.” premiumfinance.hk. https://premiumfinance.hk/checklist/ (accessed YYYY-MM-DD).