XN000022-1993-06-30 — Page 38

WEDNESDAY, JUNE 30, 1993

MORE PROTECTION FOR INSURANCE POLICY HOLDERS

A BILL PROPOSING TO GIVE GREATER SECURITY TO INSURANCE POLICY HOLDERS IS INTRODUCED INTO THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

IT

IN PROPOSES THAT A GENERAL INSURER BE REQUIRED TO MAINTAIN HONG KONG, IN ADDITION TO THE STATUTORY SOLVENCY MARGIN, ASSETS EQUAL TO NO LESS THAN 80 PER CENT OF THE LIABILITIES ARISING FROM HIS LOCAL BUSINESS.

COMPANIES SERVICES,

MOVING THE SECOND READING OF THE INSURANCE (AMENDMENT) (NO. 2) BILL 1993, THE SECRETARY FOR FINANCIAL MR MICHAEL CARTLAND, SAID LOCAL POLICY HOLDERS WOULD BE MORE CERTAIN THAT THEIR LEGITIMATE CLAIMS WOULD BE MET IN THE EVENT OF AN INSURER'S INSOLVENCY,

OF ABOUT TIME

"WE PROPOSE THAT INSURERS BE GRANTED A GRACE PERIOD SIX MONTHS FROM THE ENACTMENT OF THE BILL TO ALLOW THEM ADEQUATE TO COMPLY WITH THE PROPOSED REQUIREMENT, HE SAID.

"

THE PROPOSED REQUIREMENT WOULD INITIALLY APPLY ONLY TO GENERAL

INSURERS.

HOWEVER,

THE ADMINISTRATION WILL BE CONSIDERING IN DUE COURSE

WHETHER AND, IF So, HOW TO EXTEND THE REQUIREMENT TO LONG-TERM

INSURERS, MR CARTLAND SAID.

AT PRESENT, AN INSURER AUTHORISED TO CARRY ON BUSINESS IN HONG KONG IS NOT REQUIRED TO MAINTAIN ASSETS IN THE TERRITORY TO MATCH HIS HONG KONG LIABILITIES.

A

ALTHOUGH THE INSURANCE AUTHORITY IS EMPOWERED TO IMPOSE SUCH REQUIREMENT, HE CAN ONLY DO SO WHEN THE INSURER'S FINANCIAL POSITION IS SUFFICIENTLY PRECARIOUS AS TO WARRANT INTERVENTION.

"ONCE AN AILING INSURER'S ASSETS HAVE BEEN REMOVED OVERSEAS, IT

IS OFTEN DIFFICULT OR IMPOSSIBLE TO RECOVER THEM."*

"THE AUTHORITY MAY NOT BECOME AWARE OF PROBLEMS AFFECTING AN OVERSEAS

TAKE INSURER'S WORLDWIDE OPERATIONS UNTIL IT IS TOO LATE TO EFFECTIVE ACTION,' HE SAID.

DEBATE ON THE BILL WAS ADJOURNED.

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