Hong Kong insurance to expand into crypto and infrastructure under new risk rules

Regulators in Hong Kong are preparing a broad overhaul of the insurance regime, linking crypto risk charges with new incentives for infrastructure investment.

New capital rules for crypto assets and stablecoins

The Hong Kong Insurance Authority has outlined draft rules that would allow insurers to invest directly in cryptocurrencies and infrastructure projects. However, all crypto assets would attract a 100% risk capital charge to safeguard the stability of insurance balance sheets.

According to a presentation cited by Bloomberg, the regulator plans to apply this full capital charge to digital tokens because of their significant volatility. Moreover, the framework makes a clear distinction between different categories of digital assets, setting out tailored risk parameters for each group.

Stablecoins will receive differentiated treatment within the regime. Their risk charges will be tied to the fiat currency peg they track, rather than applying a blanket 100% rate. However, only stablecoins regulated in Hong Kong will fall directly under this approach, underscoring the jurisdictional focus of the proposal.

Regulatory review and consultation timetable

The insurance regulator set out its plan on December 4, as part of a broader review of the risk-based capital framework that began earlier this year. A spokesperson said the exercise has “a primary objective to support the insurance industry and wider economic development,” linking prudential oversight with growth policy.

Currently, the authority is still gathering feedback from industry participants before opening the formal consultation. The spokesperson confirmed they are “at the stage of gauging industry feedback” and will move to a public process once early comments are assessed.

The draft timetable envisages a three-month public consultation running from February through April, with legislative submissions to follow. Moreover, this window will allow insurers, investors, and other stakeholders to scrutinize details such as the insurance crypto risk charge and the treatment of different stablecoin structures.

Hong Kong authorities continue to position the city as a leading digital finance hub in Asia. Its monetary authority expects to approve the first stablecoin licenses in early 2025, and this new insurance framework is designed to sit alongside the emerging hong kong crypto policy architecture.

Scope of the digital asset investment framework

Under the proposal, crypto holdings on insurers’ balance sheets would be subject to the 100% capital charge, reflecting their risk profile. That said, stablecoins pegged to major currencies such as the US dollar or Hong Kong dollar would see risk charges aligned with those underlying currencies, recognizing lower volatility in most market conditions.

The regulator emphasizes that these rules are intended to give companies flexibility while preserving policyholder protection. Moreover, a clear boundary is drawn between regulated stablecoins and unregulated digital assets, with only the former qualifying for the calibrated capital treatment.

This evolving framework for hong kong insurance explicitly links digital asset investments with broader economic objectives. It aims to channel part of the sector’s sizable capital base into priority areas, while using tight capital rules to manage potential downside risks from crypto exposure.

Infrastructure investment incentives for insurers

The proposals extend beyond crypto to include a parallel regime focused on infrastructure investment incentives. Insurers that allocate capital to qualifying projects in Hong Kong or mainland China could receive more favorable capital treatment, effectively lowering the cost of such investments on their balance sheets.

Projects listed or issued within the financial hub will be eligible for these benefits. Moreover, the framework highlights the Northern Metropolis development as a flagship opportunity. New town developments and designated urban renewal schemes are also included among potential beneficiaries.

Hong Kong faces budget constraints even as it pursues ambitious infrastructure goals. The government is therefore seeking deeper private sector participation in the Northern Metropolis, a planned technology and innovation hub located near the border with mainland China. However, the Insurance Authority stresses that it maintains regulatory independence and does not simply follow government directives.

Industry reactions and calls for broader coverage

Market participants have already provided preliminary feedback on both the digital asset and infrastructure proposals. According to people familiar with discussions, several firms have argued that the current infrastructure list is too narrow and have asked for expanded eligibility across a wider range of sectors.

Some insurers are keen to see a more diverse menu of projects that can absorb long-term capital. Moreover, they want clarity on how capital incentives will be calibrated, and whether future reviews could adjust risk charges if project performance or macroeconomic conditions change.

The regulator’s challenge will be to balance prudential safeguards with attractive returns for long-duration liabilities, such as life policies and retirement products. That said, the new framework could open additional investment avenues at a time when bond yields and equity markets remain volatile.

Scale of the insurance sector and potential capital flows

The scale of the local insurance market underlines the potential impact of these reforms. As of June, Hong Kong hosted 158 authorized insurers, spanning life, general, and composite businesses. The industry generated approximately HK$635 billion in gross premiums during 2024, representing a major pool of institutional capital.

Even a modest allocation from this premium base into digital assets or infrastructure could translate into significant flows. Moreover, the proposed risk charges and incentives are designed to steer these flows toward projects and assets aligned with public policy objectives.

While the consultation is still pending, insurers are already assessing how the rules might reshape long-term investment strategies. Internal teams are evaluating potential portfolio rebalancing, from traditional fixed income toward regulated crypto exposure and qualifying infrastructure.

Next steps for policy and market development

Once the public consultation concludes between February and April, the Insurance Authority plans to refine its proposals and submit the final framework to the legislature. The process will determine how quickly insurers can begin allocating capital under the new rules.

The timing is significant, as early 2025 is also when the monetary authority expects to grant initial stablecoin licenses. Moreover, coordination between the insurance and monetary regulators will be crucial to ensure consistent treatment of digital assets across sectors.

For now, the industry is focused on preparing detailed submissions and scenario analyses. That said, the direction of travel is clear: Hong Kong intends to leverage its insurance sector to support strategic infrastructure development and cautiously regulated crypto investments.

In summary, the Insurance Authority’s plan to impose a 100% capital charge on crypto assets while offering incentives for infrastructure creates a dual-track framework. If implemented as outlined, it could reshape how insurers deploy capital in Hong Kong, linking prudential rules with long-term economic priorities.