Hong Kong: Government's Refinement Of Proposed Insurance Regulatory Regime

Last Updated: 4 July 2011
Article by Sara S.M. Or and Cindy Sze
Most Read Contributor in Hong Kong, November 2017

Originally published June 29, 2011

Keywords: Hong Kong, insurance regulatory regime, Financial Services and Treasury Bureau, Insurance Authority, IIA

The Financial Services and Treasury Bureau published the "Proposed Establishment of an Independent Insurance Authority Consultation Conclusions and Detailed Proposals" ("Consultation Conclusions") and the relevant "Frequently Asked Questions" ("FAQs") on 24 June 2011. Whilst the proposed insurance regulatory framework, based on the existing framework for the securities and banking industries, is broadly the same as that set out in the consultation paper published in July 2010, we seek to highlight in this Legal Updates some of the Government's refinement of the proposed regulatory regime. For further information on the overall proposed regulatory framework, please refer to our Legal Updates dated 14 July 2010 entitled "The End of Self-Regulation? Proposals to Establish an Independent Insurance Authority".

Broad Additional Function of the IIA

In concluding that the proposed independent Insurance Authority ("IIA") should assume an expanded role beyond the functions of the existing Insurance Authority to align with the international standards, the Government proposed in the Consultation Conclusions that the function of the IIA should also include "to assist the Financial Secretary in maintaining the financial stability of Hong Kong by taking appropriate steps in relation to the insurance industry". Comparing with the originally proposed three additional functions of the IIA (namely, (a) to perform direct regulation on the conduct of insurance intermediaries; (b) to organise public education programmes; and (c) to conduct thematic researches and studies concerning the industry), this latest proposed function of the IIA is drafted more broadly and is therefore expected to facilitate the IIA in carrying out its duties, within the power granted, by giving it a broad legal basis.

3-Year Deemed Licensed Period For Pre-existing Insurance Intermediaries

Whilst a new licensing regime for insurance intermediaries will be introduced under the proposed regime, the Government proposed in the Consultation Conclusions that the pre-existing insurance intermediaries validly registered with the current three self-regulatory organisations (i.e. the Insurance Agents Registration Board, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association) would be deemed to be licensed with the IIA for three years from the establishment of the IIA before obtaining their licences. The Government further proposed that the IIA may consider mandating the pre-existing intermediaries to submit their license applications within a fixed period upon the IIA's establishment if they wish to obtain licenses under the new regime.

Given that there are currently more than 70,000 insurance intermediaries, the proposed transitional arrangement would allow the IIA to have sufficient time to process the large volume of license applications from pre-existing insurance intermediaries in addition to those license applications made by new joiners to the industry. At the same time, the proposed 3-year transition period appears to be a reasonable time period for enabling the pre-existing insurance intermediaries to comply with any proposed eligibility requirements under the proposed licensing regime. To allay pre-existing intermediaries' concerns in relation to the transition to the proposed licensing regime, the Government clarified in the FAQs that the eligibility criteria under the proposed licensing regime would refer to the pre-existing registration conditions and that there was no intention to introduce any changes to the eligibility requirements through the legislative exercise to establish the IIA.

Restricted Power Delegation to HKMA

Whilst the Government's stance remained that the IIA should work closely with the Hong Kong Monetary Authority ("HKMA") in regulating the insurance intermediary activities of banks, the Government provided more details in the Consultation Conclusions in relation to the proposed demarcation of the regulatory roles assumed by the IIA and HKMA.

Inspection Power: The Government proposed that inspection of insurance intermediary activities of banks would be jointly carried out by the IIA and HKMA. Whilst this proposed arrangement may incur resources from both regulators, it would allow the IIA, as the primary and lead regulator, to have first-hand information to the insurance intermediary activities of banks for the purpose of making any sensible and prompt regulatory response in relation to the insurance intermediary activities of both banks and non-banks.

Investigation Power: The Government proposed that the investigation power with respect to alleged wrongdoings of bank's insurance intermediaries be generally delegated to the HKMA by the IIA subject to the IIA's decision to carry out any investigations itself, take over any investigations from the HKMA or send staff to participate in the investigation team of the HKMA. This proposal should send a clear message to the insurance intermediaries industry that the IIA is the ultimate regulator of insurance intermediaries in practice, whether or not they are bank related.

Disciplinary Power: The Government proposed that the decisions of whether to impose disciplinary sanctions on an insurance intermediary lie in the IIA whether or not the investigation is conducted by the HKMA. This proposal would ensure that all intermediaries are subject to the same disciplinary standards even if the HKMA may be involved in the inspection and investigation process.

Levy Cap on Non-life Insurance Policies

Whilst the Government maintained that one of the funding sources for the IIA would be a levy of 0.1% on insurance premiums for all insurance policies, it responded to the public request that a cap on such levy be imposed. In the Consultation Conclusions, the Government proposed to (a) cap the levy on non-life insurance policies with annual premiums at or above HKD 5 million and that on life insurance policies with single or annualised premiums at or above HKD 100,000; and (b) exempt reinsurance contracts from the levy. Such levy cap and exemption should alleviate concerns from the insurance industry that high premium policies may otherwise be driven offshore and that it would be unfair for the same insurance policy to be subject to double-levies due to reinsurance arrangement.


The Government's refinement of the proposed insurance regulatory regime set out in the Consultation Conclusions is welcome. In particular, the transitional arrangement for pre-existing insurance intermediaries appears to be sensible and that the restricted delegation of regulatory power to the HKMA appears to be a fair response to allay concerns from non-bank related insurance intermediaries.

The next step forward for the Government is to involve the insurance and banking industry and the relevant stakeholders in further refining the detailed proposals for the drafting of legislation by early 2012.

Learn more about our Hong Kong office, Financial Services Regulatory & Enforcement and Insurance & Reinsurance practices.

Visit us at www.mayerbrownjsm.com

Mayer Brown is a global legal services organization comprising legal practices that are separate entities (the Mayer Brown Practices). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; Mayer Brown JSM, a Hong Kong partnership, and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2011. The Mayer Brown Practices. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein. Please also read the JSM legal publications Disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions