SFC in talks on increased oversight of insurance, dark pool products

The Securities and Futures Commission is in talks with government and regulatory officials over increased oversight of investment-linked insurance products to safeguard the interest of investors.

The regulation was needed in light of the growing popularity of such products in recent years, according to SFC chairman Carlson Tong Ka-shing.

Tong said the SFC will also review the operation of dark pools, an electronic trading platform that may pose a threat to traditional exchanges, to determine whether it needs to impose more regulation to enhance transparency and investor protection.

"We do not yet have any position on the way forward for regulation over investment-linked insurance policies or dark pool operators. We will first conduct an overall review in these two areas and will consult the market if we decide to have any regulatory change," Tong said.

Investment-linked insurance products put a significant portion of their premium returns into investments in a portfolio of equities or investment funds, leaving policyholders to shoulder any gains or losses according to the investment return. This is different from traditional life insurance policies sold by insurers who invest the premium in more conservative products and pay dividends to policyholders.

According to the Office of the Commissioner of Insurance, annualised premiums of investment-linked products sold in the first nine months of last year amounted to HK$7.17 billion, down 19 per cent from the same period in 2011. Sales picked up from the fourth quarter as global stock markets bounced back after governments in September eased monetary policies to keep their economies humming.