On 12 July 2010, the Hong Kong Government (HK
Government) published a public consultation paper to
solicit views on its proposals for the establishment of an
independent insurance authority (IIA). Following
the consultation in June this year, the HK Government released a
paper (Proposals), which sets out the
consultation's feedback and conclusions and the HK
Government's detailed proposals on the proposed establishment
of an IIA.
The insurance industry in Hong Kong is currently regulated by
the Officer of the Commissioner of Insurance
(OCI), which is a government department, and three
self-regulatory organisations (SROs) who perform
the supervisory role in respect of insurance intermediaries.
Insurance intermediary activities conducted by banks are regulated
by the Hong Kong Monetary Authority (HKMA).
To ensure consistency, the IIA shall be the sole authority to
regulate the insurance sector, which shall include all insurers,
insurance intermediaries and banks and their employees, and the
sole authority to stipulate conduct standards and prudential
regulatory requirements. The IIA would also be responsible, in
place of the three SROs, for the licensing and direct regulation of
insurance intermediaries, which should enhance public confidence
and align industry developments with international practices.
However, the HK Government has proposed, given the different
clientele and sale environment in banks, that the IIA work closely
with the HKMA in respect of the regulation of bancassurance
activities and that the IIA should delegate to the HKMA specified
powers to perform front-line regulatory functions, although
disciplinary powers would vest in the IIA.
In order to enhance the accountability of the IIA in the
exercise of its powers and to modernize the existing appeal
mechanism it is proposed to establish an independent insurance
appeals tribunal (Appeals Tribunal). The Appeals
Tribunal have jurisdiction to review all the IIA's decisions,
including all disciplinary decisions. As the IIA is to be a
statutory body subject to checks and balances, the HK Government
proposes to appoint a governing board (Board) of
those broadly representative of the IIA's key stakeholders and
equipped with knowledge of the industry. Industry advisory
committees are also intended to be set up to provide expert advice
and recommendations to the IIA and the Board in respect of non-life
and life insurance.
The HK Government intends the IIA to be self-funding, although
it will provide an initial HK$500 million lump-sum subsidiary on
the IIA's inception. The Proposals intend that the IIA shall
recover its costs by continuing the existing fees charged by the
OCI and charging a levy of 0.1% on non-life insurance policies with
annual premiums of at least HK$5 million and life insurance
policies with single or annualized premiums of at least
The next steps in respect of establishing the IIA, include
embarking on the next phase of engagement with the industry and
relevant stakeholders, with a view to refining the detailed
proposals for the drafting of legislation. The draft legislation is
expected to be ready early in 2012 for consultation with
stakeholders and the public.
It is important that insurers and insurance intermediaries are
aware of the proposed establishment of the IIA, although the nature
of insurance regulation in Hong Kong should not greatly change.
Insurance intermediaries, in particular, should keep abreast of
developments as, once the IIA is established, they shall no longer
be self-regulating under the SROs but will be directly licensed and
regulated by the IIA.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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.
The Maltese financial services jurisdiction, particularly the insurance sector, was extensively reviewed in the first of a new series of domicile reports published by Commercial Risk Europe.
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”