Hong Kong is considering new rules for so-called asset-intensive reinsurance, offering clarity to firms in one of the hottest segments of the insurance market, people familiar with the matter told Bloomberg.

The Hong Kong Insurance Authority has in recent months sought industry feedback on changes to its rules, including additions that for the first time specifically target asset-intensive reinsurance, the people said. The reinsurance market has come into the spotlight around the world in recent years, as firms like KKR & Co and Apollo Global Management Inc closed deals worth billions of dollars.

Asset-intensive reinsurance offers a way for insurers to juice their returns, but it also adds risks. At the most basic level, insurers shift responsibility for managing a pool of assets and liabilities to a third party, which can invest the money elsewhere to boost returns. Reinsurers have become an important source of demand for private credit, a market that has caused jitters after a yearslong boom.

Under Hong Kong’s proposed rules, insurers would either just notify the regulator or seek approval depending on the scenario. For example, insurers entering into asset-intensive reinsurance contracts with third parties need only inform the regulator — rather than get explicit approval — when the reinsurer exceeds a certain credit rating threshold, and when the firm’s overall reinsured assets aren’t material compared with their long-term liabilities. Deals that require approval will be assessed on factors including credit rating, collateral and legal enforceability, the people said.

Hong Kong’s Insurance Authority said in response to inquiries from Bloomberg News that the consultation has ended and it is reviewing the feedback. The revised guideline is expected to take effect in 2027, the regulator said.

Resolution Life, a reinsurer owned by Japan’s Nippon Life Insurance Co, said earlier this year that it had closed two reinsurance transactions in Hong Kong. HSBC Holdings Plc’s life insurance arm and Hang Seng Life Ltd were on the other side of the deals, two of the people said. Each did a $1 billion deal with the reinsurer, one of the people said.

Last month, Pacific Life Re announced it had done its first asset-intensive reinsurance deal in Hong Kong. The ceding insurer was FWD Group, one of the people said.

Hong Kong insurers have used asset-intensive reinsurance to cede between $10 billion and $20 billion of liabilities to international reinsurance markets over the past five to seven years, according to estimates by consultancy Aon. The search for yield, greater access to private markets and regulatory changes have supported this demand, said Helbert Tsang, capital solutions leader for Asia life reinsurance at the firm.

Representatives for Resolution Life, Pacific Life Re and FWD declined to comment. HSBC and Hang Seng didn’t respond to requests for comment.

Last year, Japan’s financial regulator surveyed life insurers to examine risks tied to their growing practice of transferring policy liabilities to reinsurers backed by global investment firms, people familiar with the matter said at the time.

Globally, the International Association of Insurance Supervisors has pointed to risks stemming from structural changes in the life insurance industry, including an increase in cross-border asset-intensive reinsurance transactions.