XN000022-1996-01-31 — Page 9

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Explaining the amendments, a government spokesman said today (Wednesday): "The current level of minimum capital requirement was introduced in 1983. Since then, inflation has aggregated to over 100 per cent. The level of protection offered by this requirement has been substantially eroded and therefore requires updating..

"The minimum capital requirement for general business or long term business alone will be raised from $5 million to $10 million. For both general and long-term business, or general business alone which includes compulsory insurance business (for example, employees' compensation business), the minimum capital requirement will be raised from $10 million to $20 million."

Similarly, the protection offered by the current level of minimum solvency margin requirement in respect of general business had been eroded by inflation, the spokesman said.

"Therefore the current minimum of $5 million, or $10 million where the general business includes compulsory business, will also be raised to $10 million or $20 million respectively," he said.

To ensure that the solvency margin would be commensurate with the level of risks of an insurer as represented by its claim fiabilities. a solvency margin determined on a "claim liabilities basis", in addition to the current "premium basis", would be introduced, the spokesman said.

"Ah insurer will henceforth be required to maintain a solvency margin determined on a 'premium basis' or 'claim liabilities basis', whichever is the greater. This proposal is in line with international practice." he said.

Another major proposed amendment is the prohibition of use of the word "insurance" or "assurance" in business names without the consent of the Insurance Authority, unless the user is an authorised insurer, an appointed insurance agent or an authorised insurance broker regulated under the ordinance.

The spokesman pointed out that presently, any person could use the word "insurance" in his business name.

"This is undesirable as the public may be misled as to the authorised status and true nature of the business carried on by persons not regulated under the ordinance." the spokesman explained.