An ILAS is an insurance policy, not a fund: read the structure and fees before the investment options

What an ILAS is

An investment-linked assurance scheme (ILAS) is a life insurance policy in Class C, "linked long term" business, under Schedule 1 to the Insurance Ordinance (Cap. 41). Its defining feature is that the policy benefits are calculated by reference to the performance of investment options designated by the insurer, and the investment result belongs to the policy owner. The SFC Code on Investment-Linked Assurance Schemes (paragraph 3.9) excludes from the term any linked policy whose predominant purpose is life assurance rather than investment. In 2013 the HKMA described an ILAS as "essentially an investment product with an insurance wrapping".

An ILAS differs from buying a fund directly in three ways. You hold a policy issued by an insurer, not fund units; the funds are only a reference for valuation and you have no ownership of the underlying assets. The insurer charges a layer of policy fees on top of fund fees and deducts the cost of life cover from the policy value. And the product is sold under insurance rules, with a financial needs analysis, a cooling-off period and surrender charges. The so-called 101 plan is treated on this site only as one low-protection variant of ILAS.

Who regulates what

An ILAS offered only to professional investors as defined in the Securities and Futures Ordinance generally does not need SFC authorisation (SFC FAQ 1A), but remains an IA-regulated policy.

How the policy works

Premiums, after any upfront charge, are converted into notional units of the investment options the owner selects. Policy value equals units multiplied by unit price, and the ongoing platform fee and cost of insurance are deducted by redeeming units. Under paragraph 3.10 of the SFC Code, investment options may be linked to SFC-authorised funds or to pools internally managed by the insurer on a discretionary basis; the insurer need not actually invest in the selected options, and the owner has no rights over the underlying assets even where it does. If the insurer becomes insolvent, the owner ranks as an unsecured creditor; Hong Kong's Policyholders' Protection Scheme was still in preparation as at November 2026.

Two layers of fees

Policy charges go to the insurer: an upfront charge (a percentage of each premium, usually concentrated in the early years), an ongoing platform fee (an annual rate on policy value), the cost of insurance (which rises with age and with the level of cover, and can rise sharply when investments fall), and early surrender or withdrawal charges (typically highest in the first five years, often with loss of bonuses). Fund charges, such as management and performance fees, are deducted inside the unit price. The SFC's 2022 Key Facts Statement template requires a standard illustration of platform fee net of bonuses plus cost of insurance as a percentage of total premiums for a 40-year-old non-smoking male over 10, 15 and 20 years at an assumed 3% return. Since 1 November 2021 the SFC has required ILAS fees to be fair, proportionate and commensurate with the insurance protection, with the cost of insurance generally no higher than comparable term life cover.

Protection level: 105%, capital preservation and PLP

Since 1 January 2015 every new ILAS must pay at least 105% of account value on death. Three designs follow from this. A "pure 105" plan pays 105% of account value. A capital-preservation plan pays the higher of 105% of account value and total premiums paid less withdrawals. A Protection Linked Plan (PLP), a category introduced by the IA on 28 December 2021, pays before age 65 the higher of 105% of account value and 150% of total premiums payable less withdrawals, and from age 65 reverts to the capital-preservation formula. The market term "101 plan" comes from the pre-2015 design of 101% of account value and now loosely means any low-protection ILAS. The IFEC's example: a 30-year-old on a 10-year PLP paying HK$50,000 a year who dies after three years with an account value of HK$100,000 receives HK$750,000 (HK$50,000 x 10 x 150%), not HK$105,000.

Sales rules under GL26

Before an application can be accepted the intermediary must complete a financial needs analysis (FNA) and a risk profile questionnaire (RPQ); if the customer declines, the insurer cannot accept the application, and if the analysis shows neither an insurance nor an investment need the intermediary should not recommend an ILAS. The customer signs an Important Facts Statement and Applicant's Declarations, writing their own reasons for buying in the Statement of Purpose and acknowledging the long-term nature, fees, early-termination losses and the intermediary's remuneration, disclosed on an all-year-average basis. An illustration document must show expected surrender values for the first five years and every fifth year thereafter under at least two assumed rates of return. After policy issue the insurer must either have recorded the point of sale or make an audio-recorded post-sale call within five working days by staff not involved in the sale. The cooling-off period is 21 calendar days; refunds are subject to a market value adjustment that may not include issuance expenses or commission.

Who it suits, and who it does not

The investor tips attached to the Important Facts Statement say an ILAS is generally unsuitable for anyone not prepared to hold the policy through the lock-in period, anyone without a dual investment-and-insurance objective, and anyone expecting short- or medium-term liquidity needs; people who do not want their death benefit exposed to investment risk should avoid low-protection designs. The Key Facts Statement template itself states that if you are not prepared to hold the policy for the stated number of years, it is not suitable and it may be cheaper to buy an insurance policy and make separate fund investments.

Mainland Chinese readers

Mainland residents must complete the entire sales process in Hong Kong, sign all application documents there and sign the Important Facts Statement for Mainland Policyholders (in force since 1 September 2016), plus the ILAS Important Facts Statement. Since 1 January 2017 the personal foreign-exchange purchase form in the Mainland states that purchased foreign currency may not be used to buy life insurance or investment-return insurance overseas. Disputes are resolved in Hong Kong. This site carries on no sales activity in Mainland China; obtain advice in your own jurisdiction on funds, foreign exchange and tax.