XN000022-1982-05-07 — Page 2

FRIDAY, MAY 7, 1982

NEW INSURANCE LEGISLATION

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COMPREHENSIVE PROPOSALS RELATING TO THE STANDARDS OF THE INSURANCE BUSINESS IN HONG KONG WILL BE INTRODUCED INTO THE LEGISLATIVE COUNCIL AT ITS NEXT MEETING ON MAY 19.

THE PROVISIONS ARE CONTAINED IN THE INSURANCE COMPANIES BILL 1982 WHICH IS PUBLISHED IN THE GOVERNMENT GAZETTE TODAY.

COMMENTING ON THE PROPOSALS THE REGISTRAR GENERAL,

MR PIERS JACOBS, SAID: IF ENACTED THE BILL SHOULD ENHANCE THE STATUS OF HONG KONG AS A MAJOR INTERNATIONAL INSURANCE CENTRE AND AT THE SAME TIME GIVE GREATER PROTECTION TO POLICYHOLDERS.

AT PRESENT ONLY LIFE, FIRE, MARINE AND MOTOR VEHICLE INSURANCE BUSINESS IS REGÜLATED IN HONG KONG- THE NEW BILL PROPOSES THAT REGULATION BE EXTENDED TO ALL CLASSES OF BUSINESS.

UNDER THE BILL ALL INSURERS WILL REQUIRE AUTHORISATION AND WILL HAVE TO DEMONSTRATE THAT THEY ARE WELL MANAGED AND FINANG IALLY SOUND.

THE MINIMUM CAPITAL REQUIREMENTS WILL REMAIN UNCHANGED AT $5 MILLION, EXCEPT FOR COMPANIES WRITING BOTH LIFE AND GENERAL BUSINESS AND THOSE WRITING STATUTORY BUSINESS' (STATUTORY BUSINESS MEANS THOSE CLASSES OF INSURANCE WHERE THE LAW REQUIRES A PERSON TO EFFECT COVER, SUCH AS MOTOR VEHICLE (THIRD PARTY RIBK) INSURANCE). FOR THESE COMPANIES THE MINIMUM CAPITAL REQUIREMENTS WILL BE INCREASED TO $10 MILLION.

IN ADDITION TO THE CAPITAL REQUIREMENT COMPANIES MUST MAINTAIN A SOLVENCY MARGIN, THAT IS THE AMOUNT BY WHICH A COMPANY'S ASSETS EXCEED ITS LIABILITIES. IN RESPECT OF THEIR LIFE INSURANCE BUSINESS, COMPANIES MUST POSSESS A SOLVENCY MARGIN OF AT LEAST $2 MILLION AT PRESENT. IT IS PROPOSED NOW THAT THIS FIXED MARGIN SHOULD BE RETAINED FOR LONG-TERM BUSINESS, BUT FOR GENERAL BUSINESS THE SOLVENCY MARGIN SHOULD VARY ACCORDING TO THE AMOUNT OF PREMIUM INCOME. SUBJECT TO

A MINIMUM OF $2 MILLION AS AT PRESENT OR $4 MILLION IF STATUTORY BUSINESS IS WRITTEN. +FOR MANY COMPANIES,+ MR JACOBS SAID, THE FINANCIAL REQUIREMENTS WILL BE MUCH MORE STRINGENT THAN AT PRESENT, BUT THEY WILL BE MORE IN LINE WITH INTERNATIONAL STANDARDS.+

INTRODUCED FOR THE FIRST TIME ARE PROPOSALS THAT ALL DIRECTORS, CONTROLLERS AND MAIN AGENTS SHOULD BE REGARDED AS FIT AND PROPER.

TO ENSURE THAT FINANCIAL STANDARDS ARE MAINTAINED INSURERS WILL BE REQUIRED TO SUBMIT MORE DETAILED ACCOUNTS THAN AT PRESENT. THE CONTENTS ARE LAID DOWN, BUT INSURERS WILL HAVE A GREAT DEAL OF FLEXIBILITY IN PRESENTATION.

THERE FINANCIAL