Concept 概念

Premiums, Units and Policy Value 保費、單位與保單價值的關係

The defining feature of an investment-linked policy is that its value responds directly to the performance of the linked investments. The link may use a special unitised fund managed by the life insurer, or units in a unit trust or mutual fund.

Part of the premium buys fund units at the price applying when the purchase takes place. Unit values reflect the value of the fund's underlying assets, so changes in asset values can increase or reduce unit values and, consequently, policy value.

For a simple calculation, units allocated = premium amount used to buy units ÷ unit purchase price. Assuming one linked fund and that all applicable deductions have been accounted for, policy value = current number of units × current unit price; total premiums paid cannot simply be treated as policy value.

Comparison with Traditional Life Insurance and Annuities 與傳統壽險及年金的分別

Under traditional life insurance and annuities, net premiums—premiums after deducting the insurer's costs of doing business—join the insurer's general investments. Investment earnings help build the cash value used to pay policy benefits.

Death benefits and cash values under these traditional policies are usually fixed and guaranteed, with the insurer bearing the associated investment risk. Poor investment performance does not remove the insurer's obligation to meet its contractual guarantees.

Investment earnings exceeding the amount needed to support the guarantees increase the insurer's profits. Some may be distributed as dividends to participating policyholders, while the remainder may be transferred wholly or partly to shareholders' funds. If investments fall short of supporting the contractual guarantees, the insurer bears the loss.

Separate Accounts, Investment Risk and Asset Ownership 獨立賬戶、投資風險與資產擁有權

Net premiums under investment-linked policies go into separate investment fund accounts, managed separately from the insurer's general account. Policy value, and death benefits or annuity payments linked to investment performance, change with the performance of those fund accounts.

The policyholder bears all investment risk associated with the linked investments: gains can increase policy value, while losses are also borne by the policyholder. Allocating units to a policy does not give its holder direct ownership of the underlying assets recorded in the accounts; bearing investment risk and directly owning assets are distinct matters.

Linked Assets and Hong Kong Regulatory Requirements 掛鈎資產與香港監管要求

Linked assets can include equities, such as ordinary shares; fixed income securities, such as money market instruments and bonds; and cash funds or other securities or asset funds. Investment-linked policies can therefore link to more than equity investments.

Investment-linked policies are collective investment schemes under the Securities and Futures Ordinance (Cap. 571), so SFC authorisation is required for sale to the general investing public. Underwriting eligibility is governed separately by the Insurance Ordinance (Cap. 41): only authorized insurers authorised by the IA to carry on Class C business in or from Hong Kong may underwrite investment-linked long term policies. SFC authorisation of a scheme does not replace that underwriting requirement. [IA Paper V Study Notes](https://www.ia.org.hk/en/supervision/reg_ins_intermediaries/files/P5_SN_2024_eng.pdf)