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Business Financing

Life Insurance Policy Financing Facility1

Customers can pledge their Life Insurance Policies2 as collateral to obtain an uncommitted credit facility to free up cash flow for alternative purposes while enjoying the protection of the insurance policies.

  • Additional liquidity simply by pledging your company's life insurance policy2 as collateral
  • Competitive interest rate
  • Highly flexible repayment options


Premium Financing

For customers who have decided to and are able to purchase a life insurance policy to pay for a portion of the premium by making use of a credit facility.

Example: Mr. X is the CEO of Company Y. Company Y would like to purchase a Keyman Insurance Policy for Mr. X with a lump sum premium of US$1,000,000 in order to protect the company from any adverse impact resulting from any unfortunate happenings to the key person. With a US$700,000 Premium Financing facility, Company Y is required to finance only US$300,000 out of its own resources and associated interest payment(s) from its cash flow during the tenor of a drawdown.

Premium Refinancing

For customers who wish to take up a credit facility to free up cash from a fully paid insurance policy.

Example: Company Y has purchased a Keyman Insurance Policy for Mr. X with a lump sum premium of US$1,000,000 already. The Company can apply for a refinancing to free up US$700,000 and pay the interest expenses from its cash flow during the tenor of a drawdown.

The above examples are for reference only and may vary case-by-case.

Product Highlights

Credit Facility Nature Overdraft: Allows customers to have access to liquidity from the approved credit facility
Revolving loan: Allows customers to draw a loan from the approved credit facility for a designated time period on a revolving basis
Loan Advance Ratio Up to 90% of the first-day cash surrender value of the Life Insurance Policy securing the loan
Loan Amount (Facility Limit) Max: US$10 million or equivalent; Min: US$ 50,000 or equivalent
Facility Currency HKD or USD
Repayment Options Overdraft: No minimum repayment (subject to no breach of the approved facility limit)
Revolving loan: At pre-designated term: i) Interest only OR ii) Principal and Interest
Repayment Schedule/Tenor Overdraft: N/A (subject to annual facility review)
Revolving loan: At pre-designated term (subject to annual facility review)
Interest Rate* Facility in HKD: As low as HKD P-2.75% p.a.
Facility in USD: As low as USD P-1% p.a.
Loan Disbursement/Drawdown Portion of premium not being financed has to be paid by the Borrower prior to loan disbursement/drawdown

* The Interest Rate is a reference rate, which is subject to adjustment from time to time.

The above information is for reference only, and is subject to applicable terms and conditions as set out in the "Standard Terms for Banking Facilities". For further details of Premium Financing / Refinancing, please contact your Relationship Manager.

Reminder: To borrow or not to borrow? Borrow only if you can repay!

Important Points to Note:

  1. Life Insurance Policy Financing Facility (the "Facility") includes both Premium Financing and Premium Refinancing where both are uncommitted facilities secured by eligible life insurance policies (the "Policies") issued by an insurance company designated by China CITIC Bank International Limited (中信銀行(國際)有限公司) (the "Bank"), where the outstanding loan amount is repayable on demand by the Bank. The Facility is also subject to the Bank's review and discretion with respect to, but not limited to, the maximum limit of the facility, requirement of additional collateral, and demand for repayment, due to situations of including but not restricted to the insurer's credit rating being downgraded, a drop in cash value of the policy, a default in repayment or a decrease of the maximum loan-to-value ratio. The assignor of the Policies (the "Assignor") assigns and agrees to assign absolutely to the Bank all the Assignor's / beneficiary's present and future rights, title and interests in and to the Policies, all claims under the Policies and all proceeds of the Policies. The Bank shall have a lien on all assets of the borrower of the Facility (the "Borrower") coming into the possession or control of the Bank, for custody or any other reason and whether or not in the ordinary course of banking business, with power for the Bank to sell such assets to satisfy the obligations and liabilities of the Borrower to the Bank. Until the Secured Liabilities (as defined in the Assignment) are paid or discharged in full, each of the Assignor and the beneficiary under the insurance policy (the "Beneficiary") irrevocably and unconditionally postpones all of its rights of contribution from any co-assignor. Where the Bank's designated insurance company approves the existence of insurable interest between the insured and the named Beneficiaries in the policy and accept the relevant insurance application, the policy is in principle acceptable by the Bank as security, except that: (1) there is no minor beneficiary(ies) named or designated under the policy; (2) there is no irrevocable beneficiary(ies) named or designated under the policy. Additional bank documents may be required for specific class of beneficiary(ies). There will be various risks associated with Premium Financing/Refinancing. For the specific risks involved for the corresponding policy, refer to the overleaf for details.
  2. Applicable to eligible policies purchased through the Bank or CITIC Insurance Brokers Limited ("CIBL''). Please check with your Relationship Manager for the list of eligible policies.
  3. The payment benefit (if applicable) of the insurance policy e.g. guaranteed annuity payment, cash coupon, distributed dividend and their interest (if any) can only be accumulated in the policy account and cannot be withdrawn during the period where the Facility is in force.
  4. The Bank shall have the right to collect the proceeds, and/or income, and/or dividends, and/or bonuses of the insurance policy, or exercise any options contained in the insurance policy in all circumstances against the outstanding amounts owed by the Borrower to the Bank. The Bank is also entitled to obtain loans or advances on the Insurance Policy assigned either from the insurer or at any time the insurer may allow from any other persons by pledging or assigning the insurance policy as security.
  5. Within the Cooling-off Period (i.e. 21 days after the delivery of the Policy or Notice been issued, whichever is the earlier), the Bank shall have the right to exercise the cooling-off right under the insurance policy, which is the right to cancel new policies to obtain a refund of the premium(s) paid, subject to the market value adjustment (if applicable).


  • The information shown in this leaflet is for general reference only and shall not in any manner constitute or be deemed as an offer or solicitation to buy or sell any insurance products anywhere. Neither shall it be or be deemed as recommendation or advice on the suitability of any insurance products to customers.
  • All applications are subject to the approval of the Bank in its sole and absolute discretion and the applicable terms and conditions may change from time to time.

Risks Associated with Premium Financing / Refinancing ("Facility")

Policy Assignment Risk

For premium financing or refinancing, the Insurance Policy (including the rights, title and interests in and to the Insurance Policy, all claims under the Insurance Policies and all proceeds of the Insurance Policies) should be assigned from policy holders to the Bank, meaning that the policy rights, title and interests have been transferred to the Bank. As such, the Bank shall have the sole right to (i) collect the proceeds of the Insurance Policy from the insurer when a claim arises under the Insurance Policy, whether due to the death of the insured or the maturity of the Insurance Policy, and (ii) fully or partially surrender the Insurance Policy and receive the surrender value thereof, and apply all or part of the proceeds against the outstanding amounts owed by the Borrower to the Bank. The Bank shall pay any surplus after repayment of the loan facilities (if any) to the Borrower or the designated beneficiaries under the Insurance Policy or make any necessary arrangement pursuant to the provisions of the Insurance Policy. The Borrower shall remain liable for any shortfall between the amounts of the claim proceeds and/or surrender value of the Insurance Policy (as the case may be) and the Secured Liabilities (as defined in the Assignment).

Surrender Risk

The Insurance Policy will be subject to a Surrender Charge (if applicable). If the Borrower surrenders the policy, the amount payable is the Policy Value computed at the time of policy termination less any Surrender Charge and/or indebtedness, and may be substantially less than the total premiums and interest paid for the premium facility that the Borrower has paid. Please note that the policy holder may not be able to obtain the same coverage due to reasons including without limitation increases in premium and changes in health conditions. Indebtedness means indebtedness to the Insurance Company against the policy and that includes but not limited to any outstanding policy loan amount and interest accrued to date.
Premium Financing/Refinancing loan outstanding amount is repayable on demand by the Bank. Please note that the Bank may exercise any rights in and to the insurance policy including but not limited to modify/terminate the premium financing/refinancing arrangement, which may trigger negative effects to the Borrower including but not limited to early surrender of the insurance policy (e.g. if the customer is unable to meet his/her repayment obligation under the facility). In this situation, it will result in losing the original purpose of buying the Insurance Policy (such as to achieve desired financial goal of increasing the estate to be left to the designated beneficiaries, and/or to enjoy the protection and benefits provided by the related Insurance Policy, etc.); thus leading to risks and potential financial loss (e.g. loss of entitlement to income, dividends, bonuses, or other payments with respect to the insurance policy) due to early/partial surrender.

Credit Risks of Insurance Company

In the event the insurance company becomes insolvent or defaults on its obligations, the Bank may have a claim against the Borrower if the net amounts received by the Bank under the Insurance Policy are inadequate to pay off the outstanding amounts owed by the Borrower. The maximum loan to value ("LTV") ratio will depend on the credit rating of the relevant insurance company acting as the insurer under the Insurance Policy. The Bank may at its discretion modify, reduce and terminate the Facility in the event of any adverse change of the long-term credit rating of the insurer, and the Bank is also entitled to require immediate payment and/or cash collateralization of all or any sums actually or contingently owing to it under the Facility.

Death Benefit Risk

In case of the death of the insured under the Insurance Policy during the policy term, the proceeds received by the Beneficiary or the estate successor(s) may be less than the aggregate amount paid by the Borrower in connection with the Facility and subscription of the policy (including the sum of the premium paid and the incurred interest under the Facility).

Interest Rate Risk

Under the Facility, the interest rates applicable to the loan(s) may change over time, such that the Borrower may be required to pay additional interests and the costs of financing the loan(s) may increase. In addition, it may lead the net cost of interest payable higher than the rate of return generated from the Insurance Policy, resulting in loss to the Borrower.

Rate of Return Risk

There are many factors affecting the returns generated from the insurance policy. Cost of insurance will increase with the age of insured. Therefore, the return, if any, generated from the Insurance Policy may not be sufficient to cover the interest payable under the Facility and therefore reduces the rate of return from the Insurance Policy.

For example:

Assume the rate of return generated from the Insurance Policy is 2.5% p.a.
The interest rate of Policy Financing is 2.2% p.a.
The rate of return generated is sufficient to cover the interest cost of Policy Financing Facility (i.e. 2.5% p.a.-2.2% p.a. = 0.3% p.a.). The Borrower will get a 0.3% p.a. return as a result.

Scenario 1:

Assume interest rate increases to 2.7% p.a. due to market fluctuation.
The rate of return generated is not sufficient to cover the interest payable under the Facility (i.e. 2.5% p.a.- 2.7% p.a. = -0.2% p.a.). The Borrower will incur a loss of 0.2% p.a. as a result.

Scenario 2:

Assume the rate of return generated from the Insurance Policy drops to 2.1% p.a. due to an increase in the cost of Insurance.
While the interest rate of Policy Financing remains the same, the rate of return generated is not sufficient to cover the interest payable under the Facility (i.e. 2.1% p.a.-2.2% p.a. = -0.1% p.a.). The Borrower will incur a loss of 0.1% p.a.

Exchange Rate Risk

Exchange rate exposure arises when the borrower chooses a loan currency different to the policy currency. For instance, in case of premium financing, the borrower is required to convert the premium loans (e.g. HKD loans) into the policy currency (e.g. CNY) in the form of a separate FX transaction with the Bank for premium settlement. Similarly, any proceeds (e.g. denominated in CNY) received under the policy are required to be converted into the loan currency before being used for loan repayment. Ongoing market-to-market monitoring will take into account the currency conversion of the policy's surrender value against the premium loan using prevailing market rate, and the borrower will be required to top-up in case of shortfall. In adverse exchange rate movement (e.g. appreciation in the loan currency as well as depreciation of the policy currency), the top-up amount may be significant. Borrowers will be subject to financial loss arising from the Exchange Rate Risk if policy currency and/or your local currency depreciate against the loan currency.

Collateral Top-up Risk

If the outstanding loan amount is higher than the Facility Limit granted to the Borrower by the Bank (as stated in the issued Facility Letter/Approval Confirmation Letter) possibly due to situations including but not limited to unfavorable movements of the interest rate or exchange rate or crediting rate for the underlying Insurance Policy, or declining cash surrender value of the underlying Insurance Policy, the loan will be charged at the Overlimit Interest Rate. Overlimit Interest Rate may be substantially higher than the interest rate charged on the loan amount within the Facility Limit. Borrowers may be asked to provide additional money/collateral to reduce the outstanding loan below the Facility Limit. The Bank may at any time immediately terminate, cancel or suspend the Facility without the consent of any party and without subject to any condition. Therefore, early surrender of the insurance policy might be required and exposure to the surrender risk might occur.

Risk of Release of Information to the Assignee

For policy to be used as collateral assignment (e.g. for premium financing/re-financing), please note that the Bank as assignee may request the insurance company to release information relating to the insurance policies to be assigned, the assignor and the beneficiary, such as Policy details, the name of the policy owner, the insured, and the beneficiary, etc.

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