Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Plans to Establish Independent Insurance Authority to Enhance Regulation of the Industry.

 

28 September, 2011

 

The Financial Services and Treasury Bureau recently published consultation conclusions and proposals to establish an independent insurance regulator for Hong Kong's insurance industry. The creation of the Independent Insurance Authority ("IIA") is intended to bring Hong Kong's insurance regime in line with international insurance supervisory principles that require regulators to have financial, operational and political autonomy.

 

Powers and Functions of IIA

 

In addition to the existing regulation of authorised insurers, the new industry watchdog will be the primary and lead regulator for all insurance intermediaries, including bank intermediaries and their responsible officers and technical representatives. The IIA will also be empowered to organise public education programmes, conduct policy research and generally assist in maintaining the financial stability of Hong Kong's insurance market.

 

The IIA will be given enhanced disciplinary powers which will extend beyond examination of financial statements/business returns and on-site inspections, to initiating investigations, searching and seizing materials upon warrant, prosecuting offences summarily, and imposing a range of regulatory sanctions in use of misconduct committed by insurers.  An independent statutory tribunal will be formed to review decisions by the regulator, including all disciplinary decisions. 

 

Regulation of Insurance Intermediaries

 

The role of supervision of insurance intermediaries which is currently undertaken by Hong Kong's three self-regulatory organisations (namely, the Hong Kong Federation of Insurers, the Confederation of Insurance Brokers and the Professional Insurance Brokers Association), will now be assumed by the IIA under the new regime. It is expected that the eligibility criteria for licensing of insurance intermediaries (such as insurance agents, insurance brokers and responsible persons / technical representatives of corporate agents / brokers) will remain unchanged to minimise the impact on pre-existing intermediaries. Insurance intermediaries will pay an annual licence fee to the IIA which will be waived for the first five years.

 

Regulation of Insurance Intermediary Activities of Banks

 

While the IIA will assume the conduct regulation of all insurance intermediaries, the IIA will work closely with the HKMA on the regulation of insurance intermediary activities of banks. Inspections of such activities will be carried out jointly by the IIA and the HKMA, and the IIA may delegate specified regulatory powers to the HKMA where appropriate.

 

Fees

 

To support the new regime, a revised fee structure will be imposed on insurers and insurance intermediaries which includes fixed licence fees, variable fees and a levy of 0.1% on insurance premiums for all insurance policies, subject to certain caps and exemptions. The licence fee for insurance intermediaries will be waived during the first 5 years of establishment. 

 

Timing

 

A draft of the key legislative provisions is expected to be published in early 2012.

 

 

By Martin Tam

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