Definition 定義

Statutory Definition and Classification 法定定義與業務分類

Part 2 of Schedule 1 to the Insurance Ordinance (Cap. 41) places investment-linked long term policies in Class C, called Linked Long Term. This class covers life insurance contracts and contracts paying annuities on human life. [IA GL11](https://www.ia.org.hk/en/legislative_framework/files/GL11.pdf)

The key is how benefits are determined. All or part of the benefits may depend on the value of property of any description, its income, movements in its value or a related index. The property need not be identified in the contract, and a policy may combine fixed benefits with investment-linked benefits.

Although Class A is called Life and Annuity, that name does not place every life or annuity contract in Class A. A contract meeting the definition of Linked Long Term belongs in Class C.

Distinguishing Features under GL11 GL11 的辨認特點

The IA's Guideline on Classification of Class C – Linked Long Term Business (GL11) helps distinguish Class A from Class C. The starting requirement is a life or life annuity contract with one or more of the listed features.

The first feature concerns the calculation of benefits: all or part depends on the value or income of specified assets or an asset group, or on movements in a share price or another index. Deducting expenses or charges does not remove that investment link.

The other two features are a policyholder's ability to choose underlying investment assets from a range of investment fund options, and a contractual requirement for the policyholder to bear all or part of the investment risk linked to the benefits.

For examination purposes, distinguish one or more features from all three features. For example, a life policy with partly index-linked benefits cannot be excluded from Class C simply because it offers no fund choice. Bearing part of the investment risk is also sufficient for the risk-bearing feature. [GL11, paragraph 4.1](https://www.ia.org.hk/en/legislative_framework/files/GL11.pdf)

Common UK and US Names 英國與美國的常用名稱

Unit-linked life/annuities is a common UK term. It highlights the relationship between policy values and unit prices: assuming the number of units stays unchanged, changes in unit prices affect the linked value.

Variable life/annuities is a common US term. Variable describes returns that change with the value of the underlying investment; the name alone does not establish whether premium arrangements are flexible.

The Two Types of Variable Life and the Hong Kong Market 兩類變額壽險及香港市場

Fixed premium variable life is based on whole life insurance and has a fixed premium payment schedule. Practitioners usually shorten its name to variable life, omitting fixed premium. Fixed describes the payment arrangement and does not establish fixed investment returns or policy values.

Flexible premium variable life is based on universal life and is also called variable universal life or universal variable life. It combines universal life's flexibility in premiums and death benefits, and its separately identified pricing factors, with variable life's investment characteristics. Practitioners generally retain universal in its name.

The specified study material attributes variable universal life's greater popularity to its flexibility. Its Hong Kong market description identifies flexible premium variable life as the most popular investment-linked insurance product and notes that investment-linked annuities are uncommon. [IA Paper V Study Notes, section 1.1](https://www.ia.org.hk/tc/supervision/reg_ins_intermediaries/files/P5_SN_2024_chi.pdf)