XN000022-1995-02-15 — Page 38

- 16.

-

One of the main purposes of the Bill is to define clearly the functions of the Insurance Authority. The main function of the Insurance Authority is to regulate and supervise the insurance industry for the promotion of its general stability and for the protection of existing and potential policy holders. He is responsible for, amongst other things, supervising an insurer's compliance with the provisions of the Ordinance; promoting prudent business practices amongst insurers; encouraging proper standards of conduct among insurance intermediaries; reviewing the regulatory system and issuing guidelines to assist in better compliance with the Ordinance. However, the Ordinance does not contain a general description of the Authority's functions. This is unsatisfactory as insurers have occasionally challenged the nature and extent of the Authority's express statutory duties. The proposed amendments describing the Authority's functions and duties, which are no different from those presently exercised by the Authority, will lead insurers to a better understanding of his regulatory role.

The second major proposal in the Bill seeks to allow the beneficial exchange of information between the Insurance Authority and other financial regulators. In view of the international nature of insurance business and the development of financial conglomerates which offer a variety of financial services, financial regulators should be permitted to exchange information, within prescribed limits, so as to foster co- operation and enhance the effectiveness of their supervision of the relevant markets. The Bill therefore proposes that the Insurance Authority be allowed to disclose. information to other financial regulators, local or overseas, provided that such disclosure will assist the recipient to exercise his statutory functions and is not contrary to the interests of policy holders or the public interest. Similar disclosure is already permissible under the Banking Ordinance and the Securities and Futures Commission Ordinance.

Thirdly the Bill seeks to allow the Insurance Authority to approve a transfer of general business. Transfer of general business from one insurer to another becomes necessary when an insurer is about to cease business, for example, by reason of its insolvency or intended withdrawal from Hong Kong. Under common law, such a transfer requires the consent of each and every policy holder and is therefore extremely time-consuming and costly, particularly if a large number of policies is involved. It is therefore proposed that the Ordinance be amended to introduce a statutory mechanism for transfer of general business with the approval of the Insurance Authority. This amendment will not only save time and costs for insurers but also ensure that policy holders are properly protected under policies issued by another authorized insurer who continues to carry on business in Hong Kong.