On 6 July 2023, the Insurance (Amendment) Bill 20231 (the Bill) passed its third reading in the Legislative Council and the Bill as passed is expected to be gazetted on 14 July 2023 to formally become law (the new law) in Hong Kong.
Apart from introducing a risk-based capital (RBC) regime for insurers of Hong Kong under the Insurance Ordinance (IO), the new law also amends the Inland Revenue Ordinance (IRO) to (i) allow spreading over the tax liabilities of a one-off transitional adjustment upon the adoption of the regime over five years; and (ii) change the basis of taxation for non-life long term insurance business (a new category of insurance business for tax purposes) from the “formulaic method” to the “adjusted surplus method”.
