FINANCIAL AND MONETARY AFFAIRS
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At year-end, there were 31 920 insurance intermediaries, including 31 484 agents (of whom 1957 are agency firms) and 436 brokers.
Insurance Authority
The Commissioner of Insurance, appointed by the Chief Executive as the Insurance Authority (IA), has the principal function (under the Insurance Companies Ordinance (ICO)) to regulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and for the protection of existing and potential policy holders.
The ICO, which prescribes a comprehensive regulatory framework for all classes of insurance business, has the two main objectives of ensuring the financial stability of all insurers authorised in Hong Kong and the fitness and propriety of their management. These objectives are achieved through the prescription of, inter alia, the minimum share capital and the solvency margin requirements, and the requirement for directors and controllers of insurers to be fit and proper persons.
A general business insurer is also required to maintain assets in Hong Kong to meet the claims of Hong Kong policy holders. For life insurance business, a fully-fledged appointed actuary system has been implemented to ensure that the insurer would be able to meet its obligations.
Prudential supervision of insurers is carried out mainly through examination of the financial statements, reports of actuaries and other returns submitted by insurers and regular on-site visits. The IA may take interventionary action against an insurer, if considered appropriate, to safeguard the interests of policy holders. These measures include the limitation of premium income, placing of assets in the IA's custody, assumption of control by a manager appointed by the IA or petitioning for the winding-up of the insurer.
Insurance intermediaries have been brought under the regulation of the ICO since 1995. 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.
Self-regulatory measures are in place to strengthen the market discipline in the insurance industry. These measures, formulated by the insurance industry in consultation with the IA, include the adoption of a Code of Conduct for Insurers governing the writing of insurance contracts and insurance benefit illustration standards for life insurance policies.
As a member of the International Association of Insurance Supervisors, Hong Kong endeavours to ensure that its supervisory standards are in line with the principles and standards developed by the association.
Recent Developments
The IA reviews from time to time the regulatory regime of the insurance sector, in the light of operational experience, market development and the international trends to ensure its effectiveness. In the process, it maintains close liaison with industry bodies and overseas regulators. In 2002, the IA issued a number of formal and draft guidelines with a view to further enhancement of the different aspects of the regulatory regime. For instance, the IA issued a Guidance Note on the Corporate Governance of Authorised Insurers in August 2002 (which will become effective in
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