News
News //
Insurance Law Alert - July 2017
Submitted by // K Bowers, Partner; M Withington, Partner
20 July 2017


Insurance Authority Opening for Business

Background

On 26 June 2017, the Office of the Commissioner of Insurance ("OCI") ceased operations to make way for the new Insurance Authority ("IA"). The primary functions of the IA are to regulate and supervise the insurance industry in Hong Kong, to promote the general stability of the insurance market, and to protect policy holders (for further details please visit "Hong Kong's Insurance Regulatory Reform Closer to Completion" published during May 2017 and ILO newsletters during May 2014 and June 2015).

The IA is empowered by the Insurance Ordinance (Cap. 41) ("Ordinance") to:

• supervise compliance of authorized insurer’s and licensed insurance intermediary’s with the provisions of the Ordinance;

• consider and propose law reforms in relation to insurance businesses;

• promote and encourage the adoption of proper standards of conduct and sound and prudent business practices by authorized insurers and by licensed insurance intermediaries;

• review and propose reforms for regulating authorized insurers and licensed insurance intermediaries;

• regulate the conduct of insurance intermediaries through a licensing regime;

• promote the understanding of insurance products and the insurance industry to policy holders and potential policy holders;

• formulate effective regulatory strategies, facilitating sustainable market development and promoting the competitiveness in the global insurance market;

• conduct studies on matters affecting the insurance industry;

• assist the Financial Secretary in maintaining the financial stability of Hong Kong; and

• co-operate with Hong Kong's financial services supervisory authorities.

Dr. Moses Cheng, Chairman of the IA expressed his "…heartfelt gratitude to the Government and the OCI for their guidance and contribution in facilitating a smooth transition from the current regulatory regime to a new regulatory regime with an independent Insurance Authority…"

Dr. Cheng added that "[t]he IA strives to facilitate the sustainable development of the insurance industry and to better protect policy holders with a more holistic and effective regulatory system…" There are various initiatives in the pipeline, such as the development of a Risk-Based Capital regime and a Policy Holders' Protection Scheme
[1] .

To create additional protection for policy holders, the IA will within 2 years take over the direct regulation and supervisory function from the three existing self-regulatory organisations
[2] ("SROs") through a statutory licensing regime. Dr. Cheng explained that "[t]o tie in with the launch of the statutory licensing regime for insurance intermediaries, the IA will also set out conduct requirements and professional standards for practitioners by issuing codes and guidelines." The licensing requirement is estimated to cover roughly 100,000 insurance sales personnel in Hong Kong. The IA will work with the insurance industry before licensing applications begin.

The IA also encouraged insurance companies to develop financial technology. Dr. Cheng said "we are very keen on promoting fintech in the insurance industry. We are not taking a leading role but we plan to help the industry to use technology to enhance their services and better manage risks."

Comment

A newly launched IA website (www.ia.org.hk) acts as an insurance information gateway for insurers and stakeholders. It includes information (as well as videos) on the IA's statutory functions and initiatives.

Guidelines previously issued by the OCI have migrated to the new platform. Insurers authorised to carry out general business should pay close attention to the new prescribed form
[3] . We expect that new codes and guidelines, which set out the conduct and training requirement, and professional standards will follow shortly. Insurers and stakeholders should closely monitor the IA's updates, so that they can make the necessary preparations to respond to IA's requirements and statutory powers.


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[1] The protection scheme would compensate policy holders if their insurance company collapses.
[2] The three SROs are the Insurance Agents Registration Board, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association.
[3] https://www.ia.org.hk/en/legislative_framework/circulars/reg_matters/files/letter_to_all_GI_insurers_june_2017_r3.pdf


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