HONG KONG LEGISLATIVE COUNCIL - 22 February 1989
香港立法局 一九八九年二月二十二日
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over one-third or more of the voting power of the company. This definition is based upon the relevant provisions of the United Kingdom Insurance Companies Act 1974 which have since been amended to reduce the trigger point to 15%. To follow the United Kingdom practice and to bring significant shareholders within the "fit and proper" requirements, clause 2 seeks to reduce the trigger point from one-third to 15%.
Insurers authorized to carry on general (that is non-life) business are subject to minimum solvency margin requirements specified in section 10(1) of the Ordinance. The current requirements are out of date and no longer provide an adequate safety margin. Clause 3 of the Bill seeks to increase these requirements and to update the levels of relevant premium income in order to provide greater security to existing and potential policy holders.
A grace period will be given to allow insurance companies time to comply with the new requirements. This period, however, should not be too long because the new requirements are considered the minimum necessary and would, if delayed for too long, be out of date before they were introduced. On balance we consider that the new requirements should come into effect on 1 January 1991 for existing authorized insurers. Nevertheless, for insurers authorized after the enactment of this Bill, the new requirements will take immediate effect.
Sir, under section 18(1) of the Ordinance, an insurer authorized to carry on long-term business is required to cause an actuarial investigation to be made into the financial condition of the long-term fund once every two years and to submit an abstract of the actuary's report to the Insurance Authority. Clause 4 seeks to increase the frequency of such investigations to at least once every 12 months, which is in line with the United Kingdom legislation and is regarded as necessary for the purposes of prudential supervision.
Under sections 34(1) and 34(2) of the Ordinance, the Insurance Authority may require an insurer to provide specified information and to produce specified documents for inspection. Both powers may only be exercised upon the serious grounds set out in section 26(1) which include a suspected breach of the Ordinance and the failure to meet obligations under the Ordinance. These grounds cannot be called in aid lightly and often cannot be used in respect of a simple request for additional information. By contrast, the wider power of inspection under section 34(2) may also be exercised on the less stringent grounds under section 26(3), namely, that the exercise of such power is desirable in the general interests of existing and potential policy holders. There is no good reason for this difference of treatment. To remove the anomaly and to enable the Insurance Authority to carry out his duties more effectively, we