ENG-2001 — Page 123

FINANCIAL AND MONETARY AFFAIRS

Insurance Authority

The Commissioner of Insurance, appointed as the Insurance Authority (IA), aims to protect the interests of the insuring public through prudential supervision of the insurance industry in Hong Kong under the Insurance Companies Ordinance (ICO). The ICO, which prescribes a comprehensive regulatory framework for all classes of insurance business, has two main objectives of ensuring the financial stability of all insurers authorised in Hong Kong and the fitness and propriety of their management. These objectives are achieved through the prescription of, inter alia, the minimum share capital and the solvency margin requirements, and the requirement for directors and controllers of insurers to be fit and proper persons.

A general business insurer is also required to maintain assets in Hong Kong to meet the claims of Hong Kong policy holders. For life insurance business, a fully-fledged appointed actuary system has been implemented to ensure that the insurer would be able to meet its obligations.

Prudential supervision of insurers is carried out mainly through examination of the financial statements, reports of actuaries and other returns submitted by insurers and regular on-site visits. The IA may take interventionary action against an insurer, if considered appropriate, to safeguard the interests of policy-holders. These measures include the limitation of premium income, placing of assets in the IA's custody, assumption of control by a manager appointed by the IA or petitioning for the winding-up of the insurer.

Insurance intermediaries have been brought under the regulation of the ICO since 1995. An insurance agent must be properly appointed by an insurer and an insurer is required to comply with the Code of Practice for the Administration of Insurance Agents in appointing and controlling its agents. An insurance broker must meet certain minimum requirements before he can be authorised.

Self-regulatory measures are in place to strengthen the market discipline in the insurance industry. These measures, formulated by the insurance industry in consultation with the IA, include the adoption of a Code of Conduct for Insurers governing the writing of insurance contracts and insurance benefit illustration standards for life insurance policies.

As a member of the International Association of Insurance Supervisors, Hong Kong endeavours to ensure that its supervisory standards are in line with the principles and standards developed by the association.

Developments in Recent Years

To enhance the professionalism of insurance intermediaries, the Insurance Intermediaries Quality Assurance Scheme (IIQAS) was introduced in 2000. Under the scheme, all insurance intermediaries, their chief executives and technical representatives, unless otherwise exempted, are required to pass a qualifying examination before they can be registered or authorised. They are also required to attend continuing professional development programmes thereafter to ensure that the required standard of professionalism is maintained. In view of the increasing popularity of investment-linked insurance products in recent years, an examination paper on investment-linked long-term insurance under the IIQAS was launched in December.

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