Similarly, legal practitioners would do well to advise insurers that key persons should be insured persons under the company’s own Directors’ & Officers’ insurance coverage. (2) An appropriate letter of appointment should be drawn up for the key person role. The New Hong Kong Insurance Regulatory Regime, The Second Online Seminar for Lawyers in the Greater Bay Area, Sentencing for Drug Trafficking: A Fresh Approach. The Ordinance introduced and established the Independent Insurance Authority (the “ IA ”), which replaced … Section 90 of the Ordinance requires that insurance intermediaries act honestly, fairly, in the best interest of the policy holder and with integrity while exercising a level of care, skill and diligence that may reasonably be expected of a person who is carrying out a regulated activity. Should the Courts Be Making Vesting Orders Against Banks in Email Fraud Cases? Insurance regulation in Hong Kong. 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. The “key persons” regime is where we see the true substance of the modernised regulatory regime at work. These help us improve our services by providing analytical data on how users use this site. The new statutory regime for the regulation of insurance intermediaries in Hong Kong takes effect today. As such, legal practitioners would do well, when advising on the new purchase pathways and other mechanisms that technology is enabling, to benchmark these processes against some basic customer fair treatment principles. Drafting and Making Legislation in Hong Kong Drafting Legislation in Hong Kong— A Guide to Styles and Practices How Legislation is Made in Hong Kong— A Drafter’s View of the Process All rights reserved. The Ordinance has also established statutory conduct requirements applicable to licensed insurance intermediaries (section 90 of the Ordinance) as well as statutory conduct requirements which are applicable to insurance agencies (section 91 of the Ordinance) and insurance brokers (section 92 of the Ordinance). The Insurance Ordinance (Cap. Changes in insurance regulation: China / Hong Kong / Singapore / Indonesia / Vietnam 5 Subject Update Key date(s) Link laws and regulations. Business in a Pandemic: When Directors Need Help. 3.1 To align Hong Kong's regime with the international standards, IA has planned to move towards the RBC regime, under which the capital requirements for an insurance company are determined in relation to … China Insurance Regulatory Commission and the Hong Kong Office of the Commissioner of Insurance, and will be in force for a one-year trial period from the date of its promulgation. Is the customer given a practical route by which he or she can ask questions on the coverage? 3. The Legislative Council Brief and Bill are available from the LegCo website at: Briefand Bill. Legal practitioners would do well to equip themselves to advise on these issues. The four financial regulators are the Hong Kong Monetary Authority (HKMA), the Insurance Authority (IA), the Mandatory Provident Fund Schemes Authority (MPFA)and the … Stress the importance of adopting common-sense techniques such as the need to document discussions, decisions and sign-offs and the rationale behind them. The key persons in this respect are the individuals employed by the insurer, who are responsible for the performance of the control functions of risk management, finance, compliance, internal audit and intermediary management. Hong Kong SAR; T: +852 3405 2584. A change has occurred in Hong Kong’s insurance regulatory regime. A firm may have its licence suspended if it does not have an RO at any time. This individual who is approved by the IA to be a key person in intermediary management function of an authorised insurer must be employed by the licensed intermediary and must be a fit and proper person (the “Key Person”). Insurance Regulation of the insurance industry in Hong Kong is effected by a mix of statutory requirements, regulatory supervision and self-regulation by the participants in the industry. All insurance policies (with certain exceptions) incepting on and from 1 January 2018, will attract a Levy on premium which will be used to fund the Insurance Authority’s existence. ), Corporate Governance Code Amendments and Guidance for Boards and Directors, Steering Group Announces Green and Sustainable Finance Strategy for Hong Kong, Hong Kong 2021/2022 Budget – Market Highlights, HKEx Publishes Findings of Latest Review of Issuers’ Annual Report Disclosures, SFC Consults on Proposed Code of Conduct on Hong Kong Bookbuilding and Placing Activities and Proposal on HKEx Sponsor Coupling, SFC consults on changes to Competency Requirements for Licensed Intermediaries and Individuals, licensed technical representative (broker), licensed technical representatives (agents). Charltons advises insurers, reinsurers and intermediaries such as brokers and agencies on regulatory compliance and investigations. That’s when you know you have the culture right. “It is a testament of the government’s commitment to reinforce Hong Kong’s status as an international financial centre and establish Hong Kong as a preferred base for large insurance groups in Asia Pacific.” To date, only the UK, Australia, Bermuda and Singapore have implemented group-wide regulation for insurance. Certain common sense questions which view the process from the customer’s standpoint should be asked, such as: Giving advice on legislation which has not yet come into force (and codes of conduct or guidelines that have yet to be issued) is no easy task. They include virtually all core insurance processes, such as arranging, negotiating or inviting persons to enter into insurance policies, giving advice on applying for insurance, exercising a right under an insurance contract, and making and settling insurance claims. The IA is the main insurance regulator in Hong Kong. Those market participants pro-active in addressing the necessary changes are the ones who will best adapt, survive and thrive. In this regard, “regulated activities” are widely defined. Dawn Breaks on Hong Kong’s New Era of Insurance Regulation On 7 December 2015 the first part of the Insurance Companies (Amendment) Ordinance (“Amendment Ordinance”) came into force, marking a key milestone in what has been described as “the most important regulatory reform in the insurance sector in the past 30 years” 1 . Procurement of Insurance 1823 www.bd.gov.hk (Including Standard Insurance Policy) Hong Kong Federation of Insurers 2520 1868 www.hkfl.org.hk This leaflet out hes the statutory requirements for procurement of third party risks insurance by OCS, and highlights the po.nts to note when taking out the insurance… The wide diversity of innovative coverage structures to which this has given rise, serves as one of the Hong Kong insurance market’s strengths. At some point within this two-year period, the current self-regulatory regime for insurance agents and insurance brokers will be replaced with direct regulation by the Insurance Authority. The healthcare industry in Hong Kong, like other industries, does have regulations in place to help ensure that the quality of care available in the city is at a high enough level and all care offered meets ethical standards. A significant part of that independence comes from the fact that the Insurance Authority’s long-term funding is not to come from tax payers, but from the insurance industry and insurance policyholders. Financial assets are derivatives of physical or real assets, derivatives being property rights of property rights that are not "lumpy" or asset specific, a… The Key person will be responsible for establishing and maintaining internal control measures of the authorised insurer. Legal practitioners have a key role to play in advising insurers in this changing environment. The Law Society of Hong Kong | Sweet & Maxwell | Westlaw Asia | Contact Us. We use cookies to offer you a better browsing experience. It is about ensuring the key person is given the opportunity to raise issues directly to the board. The temporary measures are aimed at reducing the risk of Covid-19 infection from face-to-face meetings between insurers, intermediaries and clients.Hong Kong's IA (Insurance Authority) has announc Hong Kong Insurance Authority Allows Non-face-to-face Product Sales An insurer must be authorized by the IA before it carries on insurance business in or from … Further, this new licensing regime is expanding beyond existing brokers and agents to encompass any person carrying on “regulated activities”. Beyond the immediate changes which came into effect on 26 June 2017, looms the most significant expansion of regulatory power wrought by the new legislation. Extending personal liability to individual members of senior management beyond Directors and the Chief Executive Officer is a principal mechanism by which the new regime seeks to restrain unlawful and undesirable behaviour within the insurance industry. Insurance brokers negotiate or arrange contracts of insurance as agents of policyholders or advise on insurance related issues. Despite the planned adoption of a risk-based solvency regime in Hong Kong, captive insurers are expected to be exempted. Legal 500 Asia-Pacific, Hong Kong: Insurance, The Legal 500, 2019; Contacts. Hong Kong Insurance Regulator Launches Insurtech Initiatives. This paper covers the What, Why, Who and How of financial regulation. Nevertheless, the system changes its demands on insurers, making it a priority for them to update policy documentation and communicate it in advance to policyholders, whilst advising Finance, IT and business teams on the minutiae of the detail. The IA is now responsible for the regulation of insurance intermediaries, issuing codes and guidelines, approving licences, and is responsible for investigations and enforcement. Consultation on the introduction of R BC framework in Hong Kong . Crypto 2021 - Looking Forward On 7 March 2021, Saswat Sahu and Julia Charlton together discussed the future of crypto with... New Requirement for Responsible Officer/technical representative. (6) Finally, ensure that all key persons are announced to the company, so everybody knows their role as gate-keepers and the importance of it to the company’s everyday functioning. For those who have followed the passage of the legislation, which has seen the old Insurance Companies Ordinance be given a 21st century make-over to become the Insurance Ordinance, the empowerment of the new Insurance Authority marks the end of a very long road. For the insurance industry, however, this is merely the end of the beginning. In short, all key persons need a substantive seat at the senior management table. Key persons can also instil this culture by making sure it is known what information they expect colleagues to provide when seeking “sign off”. A letter of appointment, however, setting the parameters and expectations for the role, not only correctly documents the appointment, but gives it the appropriate status within the corporate governance framework. On 26 June 2017, the new Insurance Authority formally took over from the Office of the Commissioner of Insurance as the industry’s regulatory body. 41 of the Laws of Hong Kong) (the “ Ordinance ”) is the principal legislation regulating the insurance industry in Hong Kong. It also requires demonstration that the proposed key person meets the “fit and proper” requirements laid out in the revamped Guideline issued by the Insurance Authority on the subject. Drafting and Making Legislation in Hong Kong Drafting Legislation in Hong Kong— A Guide to Styles and Practices How Legislation is Made in Hong Kong— A Drafter’s View of the Process Looking through the lens of a lawyer working in an insurance company, the following should be priorities. Rectification of Industry Chaos by the CBIRC in 2019 In a bid to contain activities in the insurance intermediary sector that are in violation of existing laws and regulations, The new Insurance Ordinance and the new Insurance Authority mean the beginning of a period of great regulatory change for the insurance industry at a time when it is going through change itself through the general embracement of technology. Regulation of Insurance Intermediaries and Authorised Insurers by the Hong Kong Insurance Authority - Increased Focus on Responsible Officers and Senior Management 8 October 2019. Mr. Gregoire is the General Counsel of AIG Insurance Hong Kong Limited, responsible for all legal, regulatory and corporate governance issues at the company. image building for the insurance industry and enhancing the public’s understanding of insurance. Hong Kong's Insurance Companies (Amendment) Bill 2014 was gazetted on Friday 25 April 2014 and presented to the Legislative Council (LegCo) for a first reading on 30 April 2014, representing a paradigm shift in insurance regulation in Hong Kong. A golden thread which runs through the ICPs, is the need to ensure “fair treatment of customers”. This would certainly assist in setting the insurer up for success when the legislation finally bites. This requires, among other things, details of the key person’s reporting lines and where they fit in within the insurer’s management organisation. 41 of the Laws of Hong Kong) (the “Ordinance”) is the principal legislation regulating the insurance industry in Hong Kong. Being a key person comes with the prospect of personal liability, in the event the insurer itself is found to have committed an offence under the Insurance Ordinance and this is attributable to any neglect or omission on the part of a key person (see s. 124 of the Insurance Ordinance). For the substance, as well as the form, of the key-person regime to be adopted, legal practitioners would do well to assist their insurer clients with the following practical tips, as well as assisting with the submission of the Form 1As: (1) Sit down with each key person and explain the personal responsibility and expectations that comes with the role of being a key person. This is more than about drawing reporting lines on a chart. As such, the appointment of key persons is the first of the “new requirements” on the to-do list when it comes to the governance requirements of the new Insurance Ordinance. Unlike its predecessor, the Insurance Authority meets international standards of regulation because it is deemed operationally “independent” from Government. The bills amending the Insurance Ordinance (Cap.41) (the IO) which are expected to help Hong Kong grow its insurance sector have now been published in the Gazette.. (For future hires of key persons, these matters should be embedded as part of their employment contract). New distribution channels embracing technology are continually being rolled out across the board to improve customer experience. Financial markets today are the biggest markets in the world. A request which simply says “can you sign this off” demonstrates a lack of consideration for the requirements which matter. The transition marks the blossoming to life of a seed planted back in 2010 when the first consultation paper on the subject was circulated, citing the need to modernise Hong Kong’s insurance regulatory regime. Insurance intermediaries include both insurance agents and insurance brokers. (4) Ensure the potential exposures of the key person are properly managed from the outset. As a concept, the application of the Levy sounds simple, but Hong Kong is a market where insurance policy design is not dictated by the regulator, but subject to the common law principle freedom of contract. 41 of the Laws of Hong Kong) (the “Insurance Ordinance”). Does the security underpinning the platform ensure customer data is adequately protected? Online platforms which automate quoting and binding of insurance contracts are set to become the norm for more than just plain-vanilla consumer insurance products. Emma de Ronde. Following the authorization of the first life virtual insurer under the Fast Track scheme (an expedited licensing initiative for digital-only insurance providers) in late 2018, the Hong Kong Insurance Authority has granted the first authorization of a non-life virtual insurer under the scheme in October 2019. Established in 1997 as an office within the Hong Kong Government, the Office of the Commissioner of The Insurance Authority (IA), head of the Office of the Commissioner of Insurance (OCI) administers the Insurance Companies Ordinance (ICO) which has provisions governing the regulation of insurers and insurance intermediaries (agents and brokers) in Hong Kong. The functions of the IA are inter alia to regulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and the protection of existing and potential policy holders. Are key terms and exclusions being brought to the customer’s attention? The new law, designed to make Hong Kong’s insurance industry more competitive, strengthen policyholder protection and comply with the international principle that regulators be operationally and financially independent from government and industry, overhauls Hong … The two-year hiatus is intended to give the industry breathing space to prepare, but the time lag creates its own problems as the industry is already undergoing significant change before the new requirements are made clear. Regulation; Transactions, including M&A and securities; Awards and accolades. The ICPs are, after all, the international standards with which the Insurance Ordinance seeks to align. Make sure the indemnity provisions in the company’s Articles of Association are up-to-date and extend to key persons. (5) Encourage all key persons to make time to sit down with each other regularly and exchange views on what they are seeing in the organisation. Is the prospective customer given the opportunity to review policy terms and conditions before making a purchase? Key persons must also have untrammelled access to the Chief Executive Officer, so that issues can be raised to the right levels of management as and when needed. The foreign exchange market turns over US$1.2 trillion daily, roughly one quarter of annual world exports. The New Hong Kong Insurance Regulatory Regime. There is a new Form A1 which has been issued for these purposes. Mr. Gregoire is also an Honorary Lecturer at Hong Kong University where he serves as a part-time tutor for the Commercial Dispute Resolution Elective on the PCLL course. A regular meeting like this quickly embeds best-practices across the organisation, ensures nothing falls through the cracks and creates a esprit de corps amongst the control functions which makes the whole substantively stronger than the sum of its parts. Growing Focus on Sales Practices and Fair Customer Treatment. REGULATION OF INSURANCE INTERMEDIARIES AND AUTHORISED INSURERS BY THE HONG KONG INSURANCE AUTHORITY – INCREASED FOCUS ON RESPONSIBLE OFFICERS AND SENIOR MANAGEMENT On 23 September 2019, the Insurance Authority (IA) succeeded the three self-regulatory organisations in the regulation of insurance intermediaries. A change has occurred in Hong Kong’s insurance regulatory regime. So significant in fact, that the industry has been given a two-year hiatus to ready itself. The Insurance Authority has recently launched two new initiatives to promote the use of insurtech in Hong Kong.