Core Viewpoint - The recent adjustment of the demonstration interest rate cap for participating insurance in Hong Kong has raised concerns, but industry experts clarify that actual returns will not be affected by this change [1][2]. Regulatory Changes - The Hong Kong Insurance Authority has set the demonstration interest rate cap for HKD participating policies at 6% and for non-HKD policies at 6.5%, effective from July 1, 2025 [1][2]. - This adjustment is seen as a prudent regulatory measure to ensure fair marketing practices and prevent overly optimistic return predictions by insurance companies [4]. Actual Returns - The average dividend realization rate in the Hong Kong insurance industry is over 90%, indicating that the actual returns are generally stable despite the cap on demonstration rates [2]. - The demonstration interest rate cap only applies to new policies sold after July 1, 2025, and does not affect existing policies [2]. Market Dynamics - The competitive landscape in Hong Kong's insurance market has led to some companies making unrealistic return promises, which could mislead consumers [4][5]. - The demand for insurance products from mainland Chinese customers remains strong, with new premiums reaching HKD 219.8 billion in 2024, a 22% increase year-on-year [6]. Investment Appeal - Hong Kong insurance products are attractive to mainland consumers due to their flexible asset allocation and higher potential returns compared to domestic products [7][8]. - The current yield on USD-denominated assets significantly exceeds that of RMB-denominated assets, enhancing the appeal of Hong Kong insurance policies [7]. Challenges and Considerations - There are concerns regarding the high proportion of non-guaranteed dividends in participating insurance, which may lead to uncertainty in future policy returns [9]. - Issues such as the difficulty of repatriating dividends or claims back to mainland China need to be addressed to improve the overall attractiveness of Hong Kong insurance products [9].