XN000022-1993-05-06 — Page 8

7

THURSDAY, MAY 6, 1993

"CLAUSE 17 WOULD THUS IMPOSE A REQUIREMENT ON THE OVERSEAS INSURER TO NOTIFY THE AUTHORITY DIRECTLY WHEN IT PROPOSES TO CLOSE ITS PLACE OF BUSINESS IN HONG KONG, THE SPOKESMAN SAID.

"FURTHER AMENDMENTS HAVE BEEN PROPOSED TO WIDEN THE REQUIREMENT TO COVER OTHER EVENTS INDICATIVE OF AN INSURER'S INSOLVENCY, ADDED.

НЕ

CURRENTLY THE INSURANCE COMPANIES ORDINANCE DOES NOT PROVIDE FOR THE AUTHORITY TO BE NOTIFIED OF INSOLVENCY AND LIQUIDATION PROCEEDINGS TAKEN AGAINST AN INSURER INCORPORATED OUTSIDE HONG KONG OR SIMILAR PROCEEDINGS, SUCH AS THE ENFORCEMENT OF A JUDGEMENT FOR PAYMENT, AGAINST AN INSURER INCORPORATED EITHER WITHIN OR OUTSIDE HONG KONG.

"THIS IS UNSATISFACTORY AS SUCH PROCEEDINGS MAY ADVERSELY AFFECT 'THE INTERESTS OF HONG KONG POLICY HOLDERS, BECAUSE THE INSURER'S ASSETS IN HONG KONG MAY BE AT RISK OR, IN THE CASE OF

AN OVERSEAS INSURER, MAY BE SEIZED BY AN OVERSEAS LIQUIDATOR FOR THE BENEFIT OF PREFERENTIAL CREDITORS OVERSEAS, THE SPOKESMAN SAID.

||

"LEGISLATIVE AMENDMENTS TO REQUIRE EARLY NOTIFICATION OF THESE EVENTS ARE THEREFORE NECESSARY TO ENABLE THE AUTHORITY TO TAKE ACTION FOR THE BETTER PROTECTION OF HONG KONG POLICY HOLDERS, HE SAID.

I

REGARDING THE PROPOSED CHANGES TO THE SOLVENCY MARGIN, THE SPOKESMAN SAID UNDER SECTION 10(2) OF THE ORDINANCE, A LONG TERM INSURER WAS REQUIRED TO MAINTAIN A MINIMUM SOLVENCY MARGIN, THAT WAS A MINIMUM EXCESS OF ASSETS OVER LIABILITIES, OF HK$2 MILLION.

ITS

"THIS MINIMUM, SET IN 1983, IS TOO LOW ΤΟ PROTECT POLICY HOLDERS AGAINST THE RISK THAT THE INSURER MAY BE UNABLE TO MEET OBLIGATIONS IN FULL," THE SPOKESMAN EXPLAINED.

ΤΟ ENABLE THE AUTHORITY TO RECEIVE EARLY WARNING AND REQUIRE CORRECTIVE ACTION WHEN AN INSURER'S ASSETS APPROACH THE STATUTORY MINIMUM,

SOLVENCY

CLAUSES 4, 9 AND 10 OF THE BILL WOULD ADJUST THE AMOUNTS OF MARGIN MAINTAINED BY AN INSURER IN RESPECT OF ITS LONG TERM BY REFERENCE TO AN AMOUNT TO BE PRESCRIBED BY REGULATIONS, THE SPOKESMAN SAID.

BUSINESS

THE PROPOSED PROVISIONS WOULD REQUIRE THE INSURER TO SUBMIT FOR APPROVAL. BY THE INSURANCE AUTHORITY, AND GIVE EFFECT TO, A FINANCIAL PLAN OR SHORT-TERM SCHEME, WHERE THAT INSURER HAS FAILED TO MAINTAIN THE NEW SPECIFIED LEVELS OF SOLVENCY MARGIN.

"THE

PROPOSED AMENDMENTS RELATING TO THE NEW SOLVENCY MARGINS ARE SIMILAR то PRACTICES IN OVERSEAS JURISDICTIONS AND ARE UNDERSTOOD BY THE INSURANCE INDUSTRY," THE SPOKESMAN ADDED.

WELL

THE BILL WILL BE INTRODUCED INTO THE LEGISLATIVE COUNCIL

ON

MAY 19.

18