TNAG-1364-FCO40-1810-Hong-Kong-Hansard-reports-and-minutes-of-the-meetings-of-the-1986 — Page 89

Sir,

SPEECH BY THE HONO UR AB LE THE FINANCIAL SECRETARY IN LEGISLATIVE COUNCIL : WEDNESDAY 4 DECEMBER 1985

INSURANCE COMPANIES (AMENDMENT) (NO. 2) BILL 1985

I move that the Insurance Companies (Amendment)(No.2)

Bill 1985 be read the second time.

The purpose of this Bill is to improve the

effectiveness of measures which may be taken by the

Insurance Authority to protect the interests of insurance policy holders or potential policy holders under section 35 of the Insurance Companies Ordinance.

Section 35 gives the Insurance Authority powers to impose requirements on an insurer in order to protect policy holders against the risk that the ins ur er may be unable to meet its liabilities. The usual action taken by the Insurance Authority under this section is the issue of a notice to an insurer requiring the company to make a deposit with a bank in the name of the Insurance Authority account for that particular company. The company is required to keep the deposit free of any charges, liens, encumbrances, equitable interests, and third party rights. If this requirement is breached and the deposit becomes encumbered, it ceases to be effective for the purpose for which it was set aside, that is as an inviolable fund to provide extra protection for policy

holders.

Since the enactment of the Insurance Companies Ordinance 1983, there has been one case where a charge was created on a deposit which had been required by a notice issued under section 35. As a result, the deposit

provided no protection for policy holders when the insurer concerned subsequently became insolvent.