The Hong Kong Legislative Council passed the Insurance Companies (Amendment) Bill 2014 on 10 July 2015. The Ordinance was gazetted on 17 July 2015 and will come into operation on a date to be specified by the Secretary for Financial Services and the Treasury (the Financial Secretary) in the Gazette.
The Financial Secretary has indicated that the Ordinance will be brought into force in three stages. This is to facilitate the transition from the existing Office of the Commissioner of Insurance (OCI) and the self-regulatory regime for insurance intermediaries to the independent Insurance Authority (IA), which will be established under the Ordinance.
Stage 1: a Provisional Insurance Authority (PIA) is expected to be set up by the end of 2015. The PIA will be given certain administrative powers to undertake key preparatory work, such as recruitment of senior executives. The self-regulatory system for insurance brokers and insurance agents will continue.
Stage 2: The IA will take over the work of the OCI, starting approximately one year after the PIA is set up. The IA will carry out preparatory work for regulating insurance intermediaries, including subsidiary legislation, codes of conduct for insurance intermediaries, and regulatory guidelines. It is expected that there will be public consultations.
Stage 3: Introduction of the statutory licensing regime for insurance intermediaries to replace the existing self-regulatory regime (currently operated by the Insurance Agents Registration Board, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association (SROs).
It is expected that the three-stage process will take two to three years.
Highlights of the Ordinance include:
- changing the “Insurance Companies Ordinance” to the “Insurance Ordinance”
- governance structure of the IA – including appointment of two industry advisory committees in respect of long-term and general business respectively
- checks and balances to enhance the IA’s accountability and establishment of Insurance Appeals Tribunal
- funding sources of the IA to include licence fees, user fees, policyholder levies (to be introduced pursuant to subsidiary legislation)
- public register of authorised insurers and licensed intermediaries
- strengthened corporate governance of authorised insurers including prior approval of appointment of key persons to “control functions” (e.g. actuarial, internal audit, compliance, risk management, intermediary management)
- express powers to carry out investigations and inspections and impose disciplinary sanctions on authorised insurers and intermediaries
- principles of fitness and probity and conduct requirements for intermediaries set out in the Ordinance and these may be supplemented by statutory rules, non-statutory codes and guidelines
- insurance agencies and insurance broker companies will be required to appoint a responsible officer approved by the IA
- intermediaries validly registered with the existing SROs will be deemed to be licensed by the IA for three years following commencement of Stage 3.