On 24 July 2020, Hong Kong's Legislative Council passed two bills amending the Insurance Ordinance (Cap. 41) (IO).
The first, the Insurance (Amendment) Ordinance 2020, sets out the insurance-linked securities (ILS) regime and provides a framework allowing issuance of ILAS in Hong Kong through a special purpose vehicle. Please refer to our previous Legal Update regarding the ILS scheme.
The second bill, the Insurance (Amendment) (No. 2) Ordinance (No. 2 Amendment Ordinance), enhances the regulatory framework for supervision of insurance groups where the holding company is incorporated in Hong Kong. Currently, the Insurance Authority (IA) only has direct supervision over an authorised insurer but not its related companies or the holding company if not authorised insurers. The No. 2 Amendment Ordinance amends the IO by enabling the IA to have supervision of the insurance group on a group-wide basis, bringing Hong Kong into line with international standards and practices.
Under the No. 2 Amendment Ordinance, the IA may designate a Hong Kong-incorporated holding company (Designated Insurance Holding Company) within an insurance group to be directly supervised by the IA as well as the scope of the insurance group subject to its supervision. The IA's must give its prior approval before a person may become a shareholder controller, a chief executive, director or key person in control of functions of the Designated Insurance Holding Company, including satisfying the IA that the person is fit and proper. The IA will have similar powers of inspection, investigation and disciplinary powers against the Designated Insurance Holding Company as with authorised insurers. The No. 2 Amendment Ordinance may be accessed here.
Insurers should consider how the two amendment ordinances could impact their business as well as regulation of their group.
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