XN000022-1985-11-01 — Page 2

FRIDAY, NOVEMBER 1, 1985

MOTOR INSURERS SET UP INSOLVENCY FUND

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THE GOVERNMENT TODAY (FRIDAY) SIGNED AN AGREEMENT WITH THE MOTOR INSURERS' BUREAU OF HONG KONG (MIB) FOR THE ESTABLISHMENT OF A FUND TO MEET THE CLAIMS OF ROAD TRAFFIC ACCIDENT VICTIMS FOR PERSONAL INJURY AND DEATH WHICH REMAIN UNPAID AS A RESULT OF A MOTOR VEHICLE INSURANCE COMPANY BECOMING INSOLVENT IN THE FUTURE.

THE AGREEMENT, SIGNED BY THE REGISTRAR GENERAL, MR NOEL GLEESON, AND THE CHAIRMAN OF THE MIB, MR KO YING, PROVIDES FOR THE ESTABLISHMENT OF A SECOND FUND TO BE ADMINISTERED BY THE MIB.

THE FIRST FUND WAS ESTABLISHED UNDER AN EARLIER AGREEMENT WITH THE GOVERNMENT IN 1981 TO PROVIDE COMPENSATION TO ROAD TRAFFIC ACCIDENT VICTIMS WHO SUFFERED BODILY INJURY, OR TO DEPENDANTS OF PEOPLE WHO DIED IN TRAFFIC ACCIDENTS, AND WHO WERE UNABLE TO OBTAIN REDRESS BECAUSE NO EFFECTIVE INSURANCE WAS IN FORCE.

MR KO EXPLAINED THAT THE EXISTING FUND, CURRENTLY TOTALLING ABOUT $25 MILLION, IS BEING FINANCED BY A ONE PER CENT SURCHARGE ON MOTOR VEHICLE INSURANCE PREMIUMS.

THE CURRENT SIZE OF THE FUND WAS CONSIDERED SUFFICIENT TO MEET CURRENT NEEDS AND THE SURCHARGE WILL BE REDUCED TO 0.5 PER CENT FROM DECEMBER 1.

THE SECOND FUND WILL BE QUICKLY ESTABLISHED BY A SURCHARGE OF 2.5 PER CENT ON MOTOR VEHICLE INSURANCE PREMIUMS TO BE COLLECTED BY MOTOR VEHICLE INSURERS FROM THE IR POLICY HOLDERS. THIS SURCHARGE WILL BE SUBJECT TO PERIODIC REVIEW AND AGREEMENT BETWEEN THE MIB AND GOVERNMENT.

THE SECOND FUND WILL BE USED SOLELY TO MEET THIRD PARTY CLAIMS FOR BODILY INJURY AND DEATH ARISING FROM TRAFFIC ACCIDENTS INVOLVING MOTOR VEHICLE INSURERS WHO BECOME INSOLVENT AFTER NOVEMBER 1, 1985.

MR KO SAID THAT ALTHOUGH THE MOTOR VEHICLE INSURERS WILL NOT BE GUARANTEEING THE SOLVENCY OF THE SECOND FUND, IT IS CONSIDERED THAT THE LEVEL OF SURCHARGE WILL PROVE ADEQUATE TO MEET ITS POSSIBLE FUTURE LIABILITIES.

HE ADDED THAT IT WAS POSSIBLE FOR THE MIB TO ENTER INTO THIS FURTHER AGREEMENT AT THIS STAGE BECAUSE A REASONABLE DEGREE OF PRUDENTIAL SUPERVISION OF THE INSURANCE INDUSTRY BY THE REGISTRAR GENERAL HAD BEEN ESTABLISHED UNDER THE INSURANCE COMPANIES ORDINANCE 1983.

▲ GOVERNMENT