SAA Framework under HKRBC 

Next in our series of thought leadership, focuses on the Hong Kong Risk-Based Capital (HKRBC) regime which will become effective in the second half of 2024. As insurers prepare for the new regime and those insurers who have early adopted seek to further operationalize HKRBC, there will be a greater focus on topics such as Strategic Asset Allocation (SAA), ALM and Capital Optimization, Pillar 3 reporting to name a few.

This piece of HKRBC Thought Leadership from Deloitte is on the topic of SAA. The importance of the SAA in creating long-term value for both policyholders and shareholders is a topic that has received extensive recognition among insurance companies and regulators. In addition, academic research supports the conclusion that funds that invest using a SAA have consistently generated higher median returns with less risk compared to funds that invest using a tactical asset allocation (TAA). Given these premises, it is not unexpected that SAA features in the regulatory principles of the HKRBC. The new regulations require insurers to consider the SAA through three lenses – return, risk and capital requirements, the latter representing a new lens for the SAA in the context of the Hong Kong insurance regulations. This represents a fundamental shift from how insurers derived the SAA under the Insurance Ordinance that regulated this area before HKRBC and where the implicit principle was more of a return optimization strategy.

Read the Thought Leadership and connect with a member of the team if you have comments or questions.

Dhiran Dookhi
Partner, Actuarial
+852 9500 9681
ddookhi@deloitte.com.hk

Francesco Nagari
Partner, Hong Kong FSI Leader
+852 2852 1977
frnagari@deloitte.com.hk