FINANCIAL AND MONETARY AFFAIRS
All authorised insurers are subject to the requirement for an annual audit of their financial statements. A life insurer is, in addition, subject to an annual actuarial review of its operations by an appointed actuary.
As a member of the International Association of Insurance Supervisors, Hong Kong aims at complying with the insurance supervisory standards developed by the association as far as possible. Prudential supervision is carried out mainly through examination of the annual financial statements and other returns submitted by the insurers and regular on-site visits. The ICO empowers the IA to take interventionary action against an insurer, if considered appropriate, to safeguard the interests of policy holders. These measures may include the limitation of premium income, placing of assets in the IA's custody, assumption of control by the IA or petitioning for the winding-up of the insurer.
Self-regulatory measures are in place to strengthen the market discipline in the insurance industry. These measures, which were formulated by the insurance industry in consultation with the IA, include the adoption by the industry of two Statements of Insurance Practice governing the writing of insurance contracts of life and general insurance business respectively, and the establishment of an Insurance Claims Complaints Bureau to provide an independent avenue for resolving claims disputes arising from personal insurance policies. To enhance the protection for policy holders, in 1998 the industry introduced illustration standards for non-linked life insurance policies and adopted a revised Customer Protection Declaration Form for all life policies.
Insurance intermediaries, i.e. insurance agents and brokers, have been brought under the regulation of the ICO since 1995. No person may act as an insurance intermediary unless he is an appointed insurance agent or an authorised insurance broker. An insurance agent must be properly appointed by an insurer and an insurer is required to comply with the Code of Practice for the Administration of Insurance Agents in appointing and controlling its agents. An insurance broker must meet certain minimum requirements before he can be authorised. Regulation of insurance intermediaries enhances the professionalism and integrity of the industry and, in turn, the protection of policy holders.
The government continues its efforts in promoting reinsurance and captive insurance business in Hong Kong. During 1998, apart from offering a concessionary profit tax rate to professional reinsurers in respect of their offshore business, the government also implemented a series of promotional measures, both locally and overseas, to encourage the development of reinsurance and captive insurance business in Hong Kong.
The IA is committed to improving the transparency of the operations of the insurance industry. During the year, the IA has taken the initiative to collect, compile and release statistics on the insurance industry on a quarterly basis, from the first quarter of 1998. The IA will also publish highlights of the financial information of individual insurers reflecting their market performance and financial strength with effect from his Annual Report for 1998 which is scheduled to be released in early March 1999.
The Occupational Retirement Schemes Ordinance ('ORSO') regulates private occupational retirement schemes operating in or from Hong Kong. The
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