ENG-1996 — Page 116

FINANCIAL AND MONETARY AFFAIRS

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by the SFC, of leveraged foreign exchange traders and their representatives, who are required to fulfil 'fit and proper persons' criteria. The ordinance also provides for the investigation of suspected trading malpractices, supplemented by rules governing arbitration, conduct of business, maintenance of financial resources, accounts and audit, contract notes and appeal procedures.

In September 1996, the SFC issued for public consultation a review of the ordinance in light of experience gained during its initial phase of implementation. By the end of 1996, the SFC had issued 24 foreign exchange trader licences as well as 1 042 licences for their representatives.

In April 1996, the SFC issued for public consultation a draft of a composite Securities and Futures Bill. It seeks to consolidate and streamline the existing laws governing the securities and futures markets, which are currently spread over some 11 ordinances and parts of the Companies Ordinance.

The Office of the Commissioner of Insurance exercises prudential supervision over the insurance industry in Hong Kong. It administers the Insurance Companies. Ordinance, which brings all classes of insurance business under a comprehensive system of regulation and control by the Commissioner of Insurance (Insurance Authority).

To protect the interests of policy holders, the ordinance stipulates minimum share capital and solvency requirements for all authorised insurers and requires them to submit periodic financial statements and other relevant information to the authority. It provides that any person who is not considered by the authority fit and proper to be associated with an authorised insurance company cannot acquire a position of influence in relation to such a company. It also empowers the authority to intervene in the conduct of the business of insurance companies in circumstances where the authority has cause for concern. The authority may take remedial or precautionary measures to safeguard the interests of policy holders and claimants, including limitation of premium income, restriction of new business, placing of assets in custody and petitioning for the winding-up of the company concerned.

A general business insurer must maintain assets in Hong Kong sufficient to meet the amount of the legitimate claims of Hong Kong policy holders in the event of the insurer's insolvency, particularly when it is involved in cross-border insolvency proceedings. Life insurers have to maintain a solvency margin which relates to the risk base of the business.

During 1996, various legislative amendments were brought into effect to improve insurance regulation for the better protection of policy holders. Since June 1996, the minimum capital and solvency margin requirements for insurers have been updated to ensure that they will have sufficient financial resources to pre-finance their operations and to meet the claims of the insuring public. The use of the word 'insurance' or 'assurance' in business names will also be restricted to persons regulated under the Insurance Companies Ordinance with effect from late 1997 in order to prevent the public from being misled.

Self-regulatory measures to strengthen professional discipline in the insurance market have been formulated by the insurance industry, after consultation with the government. The measures involve the adoption by the industry of two Statements of Insurance Practice governing the writing of insurance contracts of long-term and general insurance business, and the establishment of an Insurance Claims Complaints