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

> Thirty questions to settle before signing a Hong Kong premium financing facility: own numbers, loan-to-value, pricing, margin calls, exit, documents.

- URL: https://premiumfinance.hk/checklist/
- Author: Premium Finance Practice Editorial (https://premiumfinance.hk/about/)
- Reviewed by: Premium Finance Practice Editorial Editorial Board
- Published: 2026-11-04
- Updated: 2026-11-04
- Language: en

## 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](/credit-process/) page explains what the bank is checking on its side; the [FAQ](/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 https://brdr.hkma.gov.hk/eng/doc-ldg/docId/getPdf/20220401-6-TC/20220401-6-TC.pdf
- Important Facts Statement – Premium Financing (Annex) — Insurance Authority (IA) 2022-04-01 https://brdr.hkma.gov.hk/eng/doc-ldg/docId/getPdf/20220401-7-TC/20220401-7-TC.pdf
- Premium Financing Activities for Insurance Policies (HKMA circular on interest rate disclosure) — Hong Kong Monetary Authority (HKMA) 2023-10-16 https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2023/20231016e1.pdf
- Findings from IA-HKMA joint inspection exercise on premium financing (annex) — Insurance Authority (IA) and Hong Kong Monetary Authority (HKMA) 2024-06-27 https://brdr.hkma.gov.hk/eng/doc-ldg/docId/getPdf/20240627-2-TC/20240627-2-TC.pdf
- Understand Premium Financing Before Taking Out The Loan (inSight) — Hong Kong Monetary Authority (HKMA) 2024-01-22 https://www.hkma.gov.hk/eng/news-and-media/insight/2024/01/20240122
- Key Facts Statement for Revolving Credit Facility – Premium Financing & Policy Collateralization (Oct 2026) — Hang Seng Bank Limited 2026-10 https://cms.hangseng.com/cms/pws/files/PF_KFS.pdf
- Key Facts Statement for Insurance Premium Financing (fixed rate, 16 Oct 2026) — The Hongkong and Shanghai Banking Corporation Limited 2026-10-16 https://www.hsbc.com.hk/content/dam/hsbc/hk/sc/docs/wealth-financing/premium-financing/key-facts-statement.pdf

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This site is run by Premium Finance Practice Editorial, an independent insurance information site providing general education and comparison. It is not an insurer, licensed insurance intermediary or bank, sells no insurance product and accepts no application. Content has not been reviewed, approved or endorsed by the Insurance Authority (IA). For applications, quotations and policy servicing, consult a Hong Kong insurer or licensed insurance intermediary.