Hong Kong insurance companies
Charltons advises insurers, reinsurers and intermediaries such as brokers and agencies on regulatory compliance and investigations. Regulation is expected to tighten once the Hong Kong Insurance Companies (Amendment) Bill 2014 is approved by the Legislative Council and implemented.
The Office of the Commissioner of Insurance (OCI) is the lead regulator and administrator of the Hong Kong Insurance Companies Ordinance (the ICO). It authorises and monitors insurers for compliance with requirements such as paid-up capital and solvency.
Insurance intermediaries are insurance agents, who advise on, or arrange, insurance contracts in or from Hong Kong as the agent of an insurer, and insurance brokers who negotiate or arrange contracts of insurance as agents of policyholders or advise or insurance related issues. Insurance agents must be appointed by an insurer and registered as an insurance agent with the Insurance Agents Registration Board. Insurance brokers must be authorised by the IA under the Insurance Companies Ordinance and must also be members of a body of insurance brokers which has been approved by Hong Kong’s Insurance Authority.
The Independent Insurance Authority (IIA), a non-governmental watchdog which is financially and operationally independent of the government, will replace the OCI in 2015 once the Insurance Companies (Amendment ) Bill is passed. The IIA will have additional functions such as the facilitation of sustainable market development as well as greater investigative and disciplinary powers against insurers, insurance intermediaries and their responsible officers. Like the OCI, it will cooperate with the Hong Kong Monetary Authority on the regulation of financial institutions carrying out insurance activities.
The amendments to the Insurance Companies Ordinance will also establish a statutory licensing regime for insurance intermediaries which will replace the current system of self-regulation under which three organisations are responsible for regulating insurance intermediaries: the Professional Insurance Brokers Association, the Hong Kong Confederation of Insurance Brokers and the Hong Kong Federation of Insurers. A new statutory licensing regime similar to the Securities and Futures Ordinance will prescribe “regulated activities” and offences for carrying them out without a licence. The new regulated activities will include:
(1) negotiating or arranging a contract of insurance;
(2) inviting or inducing a person to enter into a contract of insurance (or attempting to do so);
(3) inviting or inducing a person to make a material decision in relation to a contract of insurance (or attempting to do so); and
(4) giving regulated advice.
Regulation of the Hong Kong Insurance Sector
Under the current regime, insurance agents and brokers are required to be licensed, while their individual employees are required to be licensed as licensed individual insurance agents or licensed technical representatives (agent) in the case of insurance agents, or as licensed technical representatives (brokers) in the case of insurance brokerage firms. Once amended, the revised Insurance Companies Ordinance will retain these five categories. There will be three types of licences for insurance agents: an insurance agency licence, an individual insurance agent licence and a technical representative (agent) licence. For insurance brokers, there will be two types of licence: an insurance broker company licence and a technical representative (broker) licence. Grant of licences will depend on the IIA being satisfied that the applicant is “fit and proper” having regard to matters such as the person’s education, qualifications and experience, solvency and whether any disciplinary proceedings have previously been brought against such person.
It will be a criminal offence under the amended Insurance Companies Ordinance for a person to carry on business as an insurance agent or broker without being licenced to do so. The offence carries maximum penalties of 2 years’ imprisonment and a fine of HK$1 million.
New Requirement for Responsible Officer
The new regulatory regime will require all licensed insurance agencies and brokers to appoint a Responsible Officer (an RO), who must be a licensed technical representative and fit and proper to discharge the responsibilities of an RO. ROs will be required to use best endeavours to put in place proper controls and procedures to ensure compliance with the conduct requirements specified in the Insurance Companies Ordinance. A firm may have its licence suspended if it does not have an RO at any time.