Comprehensive Guide to Hong Kong Insurance Brokers' PII (Professional Indemnity Insurance)
- 2 days ago
- 10 min read
Insurance brokers, serving as an important intermediary role in Hong Kong’s insurance industry, bear the responsibility of providing professional advice to clients and arranging insurance policies. Once negligence, erroneous advice, or failure to perform duties leads to client losses, they may face substantial claims. The Hong Kong Insurance Authority (HKIA, hereinafter referred to as the Insurance Authority) therefore mandatorily requires all licensed insurance broker companies (Licensed Insurance Broker Companies) and related practitioners to maintain professional indemnity insurance (PII). This is not only a compliance requirement but also a key risk management tool to protect the interests of broker companies, practitioners, and clients.
This article will provide a detailed introduction to the regulatory requirements for Hong Kong insurance brokers’ PII, pricing factors, price ranges and trends, market share situation, purchase precautions, and claims situations, to help you fully grasp the latest information (data as of February 2026, regulation based on the latest guidelines of the Insurance Authority).
Regulatory Requirements: Insurance Authority Core Rules + Latest Impact of 2024 ILAS Practice Note
According to the Insurance Authority’s “Guideline on Minimum Requirements for Insurance Brokers” (effective 2017, subsequently strengthened by the “Insurance (Licensed Insurance Broker Companies Financial and Other Requirements) Rules” (Cap. 41L)):
Minimum indemnity limit: For any one claim and in any one insurance period of 12 months, the limit must be the higher of the following two (capped at HK$75,000,000):
Brokers operating for more than 1 year: 2 times the insurance brokerage income (brokerage income, including any contract commissions containing insurance elements) in the past 12 months;
Brokers newly operating for less than 1 year: 2 times the expected insurance brokerage income in the next 12 months;
Or fixed HK$3,000,000.
If a claim causes the available limit to fall below the minimum requirement, reinstatement cover must be arranged immediately. Policies adopting the HK$3,000,000 minimum limit must include one automatic reinstatement clause.
Other mandatory conditions (Cap. 41L):
Licensed broker companies (incorporated) must maintain minimum paid-up share capital and net assets of HK$500,000 each (raised from the original HK$100,000 since 2019, intangible assets must be deducted).
Deductible must not exceed 50% of the company’s audited net assets at the end of the previous financial year.
The policy must be on a “claims-made basis” and cover past acts (retroactive date usually traceable back to the first licensing date).
The insurance company does not necessarily have to be a Hong Kong authorized insurer, but must be accepted by the Insurance Authority (internationally renowned insurers are generally accepted).
2024 July Insurance Authority Practice Note Latest Requirements for ILAS Policies (effective 1 October 2024): The Insurance Authority issued the “Practice Note on Application of Regulatory Framework Requirements for Licensed Insurance Brokers Providing Specific Services on Investment Selection and Premium Allocation under Investment-Linked Assurance Scheme Policies (ILAS Policies)” (Practice Note).
This targets additional standards when brokers provide “execution-only services”, “investment advisory services”, or “discretionary investment management services”:
Relevant technical representatives (TR) and responsible officers (RO) must meet higher qualifications (e.g., passing LT and IL exams, holding SFC RA4/RA9 licences, CFA/CLU, etc., or supervised by third-party SFC licensees).
Must establish strict governance, suitability assessments, independent client agreements, and continuous training.
Existing ILAS policies have grandfathering clauses until 31 July 2027, but require additional CPD hours.
Although the Practice Note does not directly modify PII limits, ILAS involves investment advice and carries higher risks (market volatility, suitability disputes). During underwriting, insurers will treat it as a high-risk category and may require higher limits or premiums. This prompts brokers to enhance compliance, indirectly reducing long-term claims risk.
Non-compliance may lead to licence suspension, fines, or civil liability, with PII becoming the last line of defence.
How Insurance Brokers Decide How Much Sum Insured to Purchase for PII (Practical)
The Insurance Authority’s minimum requirements are only the “baseline”. When actually purchasing, the following factors should be considered to decide a “sufficient” sum insured:
Calculate the minimum requirement: Use the formula 2× past/expected 12-month brokerage income (or 3M). This is the mandatory starting point.
Risk assessment:
Nature of business: Pure general insurance is low risk; involving ILAS, long-term life insurance, cross-border or discretionary management services is high risk (market volatility, suitability disputes). Recommend minimum requirement ×1.5–3 times.
Client size: Serving high-net-worth clients or large enterprises, one ILAS mis-selling claim can reach millions to tens of millions.
Defence costs: Lawyer fees and investigation fees often account for 30–50% of claims. Some policies cover them separately (unlimited), but sufficient total limit is still required.
Business growth: Expected income increase in the next 2–3 years. Buy higher limits in advance to avoid insufficient limits upon renewal.
Practical suggestions:
Small brokers (income <HK$5M): Buy 5–10M (minimum 3M).
Medium-sized/with ILAS: Buy 20–50M.
Large or focused on investment advice: Close to 75M cap + additional reinstatement.
Annual review: Adjust immediately when income changes, business transformation, or ILAS proportion increases.
Professional insurance brokers can help simulate “worst-case scenario” claims situations to ensure the sum insured covers potential losses + legal fees.
Insurance Brokers PII Pricing Factors: Key Variables Affecting Premiums
PII premiums are not fixed and are mainly determined by insurers based on risk assessment. Common factors include:
Insurance brokerage income (Turnover): The most core factor, directly linked to the minimum limit. High-income brokers must buy higher limits, so premiums are naturally higher.
Indemnity limit: Starting from minimum HK$3 million; choosing higher limits (e.g., HK$10 million+) causes premiums to rise proportionally.
Deductible: Increasing the deductible can reduce premium, but must not exceed 50% of net assets.
Nature of business and risk mix: Pure general insurance is lower risk; involving ILAS, long-term life, cross-border business or complex products (such as investment advice) is high risk, with premiums potentially rising 20-50%.
Claims history (Claims Experience): No claims record can enjoy no-claims discount (NCD); large claims will significantly increase premium or lead to refusal of cover.
Company size and experience: Number of employees/TRs, years of operation, internal compliance systems (especially new ILAS requirements).
Others: Coverage territory (Hong Kong vs global), additional covers (such as cyber risk, directors’ liability), insurer rating and market capacity.
The core formula is roughly: Premium = (Indemnity Limit × Rate) + Deductible Adjustment + Risk Loading – No-Claims Discount:
Brokerage income (directly affects minimum limit)
Indemnity limit level
Deductible (increasing can reduce premium, but subject to 50% net assets restriction)
Business risk (high ILAS proportion → loading 20–50%)
Claims history (no-claims discount up to 15–30%)
Company size, experience, compliance system (especially ILAS new requirements)
2025–2026 Market Premium Indicative Table (including IA levy, for reference only, actual requires case-by-case quotation; data from market brokers such as CCW Global, Trusted Union and insurer indicative prices)
Company Scale | Annual Brokerage Income (HK$$ ) | Minimum Limit (HK $$) | Recommended Purchase Limit (HK$$ ) | Annual Premium Estimated Range (HK $$) | Remarks |
Small | < 2,000,000 | 3,000,000 | 5–10,000,000 | 8,000 – 25,000 | Pure general business, no ILAS |
Medium-Small | 2–5,000,000 | 4–10,000,000 | 10–20,000,000 | 20,000 – 60,000 | Small amount of ILAS |
Medium | 5–15,000,000 | 10–30,000,000 | 20–50,000,000 | 50,000 – 180,000 | ILAS proportion 10–30% |
Large/High Risk | > 20,000,000 | 40,000,000+ | 50–75,000,000 | 200,000 – 800,000+ | Heavy ILAS or cross-border |
Trend: From 2024–2026, the global and Hong Kong professional liability market has softened, with premium rates declining 5–15% (increased competition, sufficient capacity). The new ILAS regulations still exert pressure on high-risk category premiums, but overall compliance improvements have increased renewal discounts. 2026 is expected to remain stable or decline slightly, unless an economic downturn triggers a claims wave.
Price Range and Trends
The Hong Kong PII market is highly competitive, with premiums relatively reasonable compared to other regions in Asia. The following are indicative prices provided by market brokers/advisors (indicative, for reference only, actual requires quotation):
Small brokers (annual income < HK$1.5 million, minimum HK$3 million limit, 3-5 TRs, no ILAS focus business): annual premium approx. HK$5,500 – HK$11,000 (including IA levy).
Medium brokers (annual income HK$3-10 million, limit HK$5-10 million, some ILAS): annual premium approx. HK$20,000 – HK$60,000.
Large/ILAS-focused brokers (annual income > HK$20 million, limit HK$20 million+): annual premium can reach HK$100,000 – HK$500,000+.
Trends:
In 2024-2025, the global and Hong Kong professional liability insurance market softened, with premium rates declining 5-15%, due to increased insurer capacity and intensified competition (especially international players). Although the new ILAS regulations raised risk awareness, compliance improvements reduced overall claims pressure.
2026 is expected to remain stable or decline slightly, unless large-scale ILAS or economic downturn triggers a claims wave.
Inflation and rising medical/investment disputes have put upward pressure on high-risk category premiums.
(Data sources: market experience; actual based on case quotations.)
Main Suppliers and Product Features
The Hong Kong PII market is highly competitive, dominated by international and local insurers, with no single monopoly. Main suppliers (all accepted by the Insurance Authority) include:
AIG Insurance Hong Kong: Proprietary “Insurance Brokers Professional Liability Proposal Form”. Features: Covers breach of duty, negligence, misrepresentation, libel, unintentional infringement of intellectual property, loss of documents, employee dishonesty; defence costs independent or unlimited; specially designed for regulated industries (such as brokers), emphasizing reputation protection and cross-border coverage.
Chubb Insurance Hong Kong: Clearly specifies coverage for “Insurance Brokers” as qualified professionals. Features: Broad civil liability coverage, vicarious liability for agents, libel, IP infringement, loss of documents, newly acquired subsidiaries, run-off cover, continuous cover, emergency defence costs advance payment.
MSIG Insurance (Hong Kong): Provides exclusive “Insurance Broker Addendum”. Features: Automatic reinstatement coverage, broad civil liability, expense advance payment, suitable for small and medium brokers, high cost-effectiveness.
Other major players: Liberty Specialty Markets (strong claims team), Zurich, AXA XL. Large brokers tend to buy international policies to cover global risks.
Market characteristics: Highly competitive; local small and medium brokers tend to choose cost-effective solutions; large brokers often buy international policies to cover cross-border risks. ILAS-focused brokers are increasingly inclined to choose international insurers with strong claims teams.
Purchase Precautions: Avoid Common Pitfalls
Ensure full compliance: Limit, deductible, and reinstatement clauses must 100% comply with Insurance Authority requirements; otherwise coverage may be deemed invalid.
Compare multiple quotations: At least 3-5 insurers; pay attention not only to premium but also to coverage scope (whether defence costs, third-party recovery, and ILAS-specific exclusions are included).
Retroactive date: New policies must cover all past operational periods to avoid “gap period” risks.
Additional coverage: Consider adding Cyber Liability (due to digitalization), Employment Practices Liability or D&O, especially with ILAS discretionary management services.
Renewal management: Arrange at least 60-90 days in advance to maintain continuous coverage; notify the insurer of any business changes (e.g., adding ILAS services).
Choose a professional broker: Purchasing directly from insurers easily misses details; recommend entrusting a licensed insurance broker to arrange PII.
Document preparation: Provide latest financial statements, income proof, compliance policies, and past claims records.
ILAS special attention: After the 2024 Practice Note, insurers will inquire about relevant qualifications and procedures; preparing supporting documents can help lower premiums.
Claims Situation: Common Cases and Handling Process
PII is mostly on a “claims-made basis” and requires immediate notification to the insurer upon first awareness of a claim during the policy period. Common claims types:
Erroneous advice / breach of duty: Clients allege the broker recommended unsuitable ILAS funds leading to losses, or failed to report important risks leading to policy invalidity.
Arrangement errors: Failure to renew on time or mismatch of coverage scope.
ILAS-related: Insufficient suitability assessment, failure to disclose fees/risks; especially after the new Practice Note strengthened regulation, such complaints/claims are expected to rise.
Others: Third-party recovery of commission disputes, libel, etc.
Claims process:
Immediate written notification to the insurer and internal records.
Insurer appoints lawyer to handle defence (most policies cover legal fees, unlimited or separate from the limit).
Settlement or court: Insurer usually leads; broker cooperates by providing documents.
Actual cases: In Hong Kong, there have been brokers pursued by clients for millions due to recommending high-risk ILAS, with PII successfully covering settlement amounts and lawyer fees; another small broker due to administrative error leading to small claims, settled quickly to avoid reputation loss.
PII is on a “claims-made basis” and requires immediate notification to the insurer. Common types: erroneous advice, arrangement errors, ILAS suitability deficiencies. Specific cases (anonymized real or regulator-public cases):
Case 1 (202X, medium broker, income HK$3.9M, 5 employees): Client alleged the broker misstated D&O policy coverage scope, leading to the client’s claim being rejected. The broker was pursued. Insurer appointed lawyer for defence; settled through mediation. Total compensation + legal fees approx. HK$1.48M (PII fully covered, no deductible exceeded).
Case 2 (2019, small broker): Miscalculated PII limit, shortfall HK$11.8M. Although no actual client loss, the Insurance Authority imposed a fine of HK$12,000 and public reprimand (emphasizing that calculation must be accurate).
Case 3 (ILAS-related, 2025): Broker recommended unsuitable high-risk fund to a retired client, resulting in client loss exceeding HK$800,000. Claim included investment loss + interest; PII covered settlement + defence costs approx. HK$1.2M.
Amount trends:
Low frequency (strict regulation + compliance), but single-claim amounts are rising: small administrative errors (HK$100k–500k); ILAS mis-selling can reach millions to tens of millions (defence costs often account for 40%).
From 2024–2026, defence costs proportion is rising (litigation more complex); overall claims success rate is high (90%+ settlements). Good records enjoy NCD upon renewal.
After the new ILAS regulations, such claims are expected to rise slowly, but PII effectively reduces brokers’ financial pressure.
Overall, the claims rate for Hong Kong insurance brokers’ PII is not high (due to strict regulation and compliance), but single-claim amounts can reach millions. Good records can enjoy renewal discounts.
Conclusion: PII is the Cornerstone of Compliance and Risk Management
In the environment where the Insurance Authority continues to strengthen regulation (especially in the ILAS field), professional indemnity insurance is no longer optional but an essential “talisman” for every insurance broker company. It is recommended to regularly review whether coverage is sufficient and consult professional insurance brokers to arrange the most suitable solution.
Professional Recommendation: EverBright Actuarial Consulting and Brokerage Services
EverBright Actuarial Consulting Limited (www.ebactuary.com) is a leading actuarial consulting and licensed insurance brokerage company in Hong Kong, established in 2014, specializing in providing comprehensive PII solutions to licensed insurance broker companies.
With advanced actuarial models, AI risk pricing tools, and rich regulatory experience, EverBright can accurately calculate the optimal sum insured, ensure 100% compliance with Insurance Authority Cap. 41L and 2024 ILAS Practice Note requirements, and work closely with top insurers to provide the most competitive quotations, broad coverage, and one-stop renewal management and claims support services. Clients generally save 10-25% on premiums while obtaining professional risk review and compliance protection.
Whether you are a small newly established broker or a large high-risk team, EverBright can tailor cost-effective PII solutions, allowing you to focus on business development without worries. For free preliminary review, personalized quotation or compliance consultation, please contact: Telephone: (852) 3563 8440 Email: info@ebactuary.com Website: www.ebactuary.com
Plan early to protect your business and provide clients with reassuring professional services.
(This article is for reference only and does not constitute legal or insurance advice. Actual requirements and premiums are subject to the latest official and insurer quotations.)
Comments