XN000022-1990-05-25 — Page 11

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FRIDAY, MAY 25, 1990

UNDER THE EXISTING ORDINANCE, THE CARRYING ON OF ANY CLASS OF INSURANCE BUSINESS IN OR FROM HONG KONG IS SUBJECT ΤΟ AUTHORISATION BY THE IA.

AS

"HOWEVER, THERE REMAINS A DOUBT IN THE EXISTING LEGISLATION TO WHETHER INSURANCE CONTRACTS ENTERED INTO BY UNAUTHORISED INSURERS ARE VALID AND ENFORCEABLE, THE SPOKESMAN SAID.

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TO PROTECT THE POLICY HOLDER, THE BILL PROPOSES THAT A DIRECT INSURANCE CONTRACT ISSUED BY AN UNAUTHORISED INSURER SHOULD BE ENFORCEABLE AT THE OPTION OF THE POLICY HOLDER WHO CAN CHOOSE EITHER TO ENFORCE OR VOID THE CONTRACT.

"IF THE POLICY HOLDER CHOOSES TO VOID THE CONTRACT, HE IS ALLOWED TO RECOVER ANY CONSIDERATION PAID UNDER THE CONTRACT, THE SPOKESMAN SAID.

I

'HOWEVER, THE BILL PROPOSES THAT A ENTERED INTO BY AN UNAUTHORISED INSURER SHOULD ADDED.

REINSURANCE CONTRACT BE ENFORCEABLE, HE

T

OF

"IF A REINSURANCE CONTRACT WERE TO BE UNENFORCEABLE BECAUSE A CONTRAVENTION BY EITHER THE INSURER OR REINSURER, THIS COULD MATERIALLY AFFECT THE ABILITY OF THE INSURER TO MEET CLAIMS OF DIRECT POLICY HOLDERS, HE SAID.

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"TO PROTECT THE POLICY HOLDER, THE GOVERNMENT CONSIDERS THAT AN INSURER SHOULD BE ABLE TO RECOVER FROM ITS REINSURER ANY DIRECT CLAIMS PAID, WHETHER OR NOT THE INSURER OR REINSURER WERE DULY AUTHORISED, THE SPOKESMAN SAID.

TT

ALSO UNDER THE EXISTING ORDINANCE, AN INSURER HAS ΤΟ NOTIFY THE IA AFTER EVERY CHANGE IN CONTROLLER OF THE COMPANY AND, UPON NOTIFICATION, THE LA MAY OBJECT TO SUCH APPOINTMENT OR CHANGE IF IT APPEARS TO HIM THAT THE CONTROLLER IS NOT A FIT AND PROPER PERSON TO HOLD SUCH POSITION.

"THIS ARRANGEMENT IS UNSATISFACTORY BECAUSE IN THE INTERESTS OF POLICY HOLDERS, A PERSON WHO IS NOT FIT AND PROPER SHOULD NOT BE IN CONTROL OF AN INSURER FOR EVEN A SHORT PERIOD, THE SPOKESMAN EXPLAINED.

THE BILL PROPOSES THEREFORE TO REQUIRE PERSONS WHO ARE TO BE APPOINTED AS OR OTHERWISE TO BECOME CERTAIN TYPES OF CONTROLLERS OF AUTHORISED INSURERS TO SEEK PRIOR APPROVAL OF ΙΑ BEFORE THE APPOINTMENT OR CHANGE TAKES PLACE.

A CONTROLLER, AS DEFINED UNDER SECTION 9 OF THE ORDINANCE INCLUDES, INTER ALIA, A PERSON WHO, ALONE OR WITH AN ASSOCIATE OR NOMINEE, CONTROLS 15 PER CENT OF THE VOTING POWER OF THE INSURER (I.E. CONTROLLING SHAREHOLDER).

/"TO PREVENT