Hong Kong's new insurance regulator, the Insurance Authority (IA), has begun work 26 June 2017. The Insurance Authority (IA) will replace the Office of the Commissioner of Insurance (OCI), a Government department, to regulate insurance companies. The OCI will be disbanded.
The IA is a regulatory body independent of the Government and the industry. Empowered by the Insurance Ordinance (Cap. 41), the IA's principal function is to regulate and supervise the insurance industry to promote the general stability of the insurance industry and protect policy holders.
Since its establishment in December 2015, the IA has been preparing for the takeover of regulatory functions in phases. The enhanced regulatory regime has expanded the scope of regulatory oversight over insurance companies. Within two years, the IA will further take over the direct regulation of insurance intermediaries from the three Self-Regulatory Organisations (SROs)1 through a statutory licensing regime, thus protecting policy holders in a more comprehensive manner.
"On behalf of the IA, I must express our 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," said Dr. Moses Cheng, the Chairman of the IA. "We are equally encouraged by the tremendous support and acknowledgement from the insurance industry, including the two statutory Industry Advisory Committees2, for the IA's work."
"The 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," he added. "Various initiatives, including the development of a Risk-Based Capital Regime and the introduction of a Policy Holders' Protection Scheme, are in the pipeline. To 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 IA is led by a strong executive team, comprising existing regulatory talent and veterans from the insurance industry," Dr. Cheng said. "Together with the support of its professional staff, I am confident that the IA will keep up the good regulatory work and continue to collaborate closely with all stakeholders, including industry practitioners, in working towards the common goal of promoting Hong Kong as an insurance hub in the Asia-Pacific region."
Upon completing the changeover, the IA will start off with about 180 staff, gradually expanding to about 300 when it starts regulating insurance intermediaries.
The establishment of the IA and its initial years of operation will be funded by the Government. In the long run, the IA has to be financially independent of the Government and recover its operating costs. The Insurance Ordinance provides for the IA to collect an annual authorisation fee from insurance companies and user fees for specific services with effect from 26 June 2017. Separate subsidiary legislation for the collection of a levy on premiums from policy holders with effect from 1 January 2018 has been submitted to the Legislative Council for vetting.
1The three SROs are the Insurance Agents Registration Board, established under the Hong Kong Federation of Insurers, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association.
2The IA is required by law to set up two Industry Advisory Committees to advise it, one on matters relating to long term business and one on general business.