The Insurance Act 2015 (the "Act") comes into force tomorrow. It represents a fundamental departure from existing insurance law. The changes impact on a number of key areas which are...11 August 2016
Hong Kong – New independent insurance authority
New functions and sanctioning powers
The IIA will be financially independent from the government and will have an independent governance structure. It will have additional functions such as regulating insurance intermediaries through a licensing regime, conducting industry-wide thematic studies and conducting inspections and investigations of individual insurers. It will also have a new power to impose substantial fines for regulatory breaches.
New regulated functions within insurers
In relation to appointments of senior personnel, the IIA will have the power to revoke the approval of an appointment if it considers that the person is not, or is no longer, fit and proper. In extension of the current regime (which applies only to chief executives, managing directors and persons who have certain control over the voting power of an insurer), all new appointments of directors and persons in "control functions" will need to be approved by the IIA. "Control functions" will include risk management, financial control, compliance, internal audit, actuarial and intermediary management functions.
The new IIA is expected to have significantly more staff than the existing regulator, so it can be expected to be more intrusive to enhance prudential and conduct regulation of insurers. The approval requirements in relation to directors and control functions will increase the administrative burden on insurers and may result in certain proposed appointments being rejected by the IIA.
While the establishment of the IIA will bring Hong Kong in line with other leading financial centres where insurers are already regulated by an independent regulator, it will represent a major change for an industry accustomed to a less intrusive regulator and, in certain key areas such as insurance intermediation, a high degree of self-regulation.
Please click here for further discussion of some of the major changes.
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Introduction03 August 2016