ENG-2003 — Page 121

FINANCIAL AND MONETARY AFFAIRS

The SFC Working Group on Review of Financial Regulatory Framework for Licensed Corporations, which was established in May 2002 to review the arrangements for securities margin finance providers (SMF providers) to pool and re-pledge clients' securities as well as the need to tailor regulatory capital requirements, has made good progress in examining the various risks arising from the operation of securities firms. The SFC plans to conduct public consultation in relation to these measures in 2004.

The SFO has also given the SFC greater flexibility and powers to pursue and combat market crimes and misconduct. In implementing the new SFO, the SFC has refocused its enforcement resources in the last year to address three areas of high risk in the financial markets in Hong Kong: corporate misconduct, serious misconduct by intermediaries, and market misconduct. These areas will continue to be the SFC's enforcement priorities in the coming year. The SFC is also taking a tougher stance towards such misconduct.

Insurance Sector

Main Features

Hong Kong is one of the most open insurance centres in the world. At year-end, there were 188 authorised insurers, 94 of which were incorporated in Hong Kong and the remaining 94 were incorporated in 22 overseas countries or the Mainland, with the United States taking the lead followed by the United Kingdom.

Notwithstanding the economic slowdown, the total gross premiums of the insurance industry reached $89.0 billion in 2002, representing a 16.6 per cent growth over 2001. Gross premiums of the general insurance sector increased by 20.6 per cent to $23.4 billion in 2002. General Liability, Property Damage, Motor Vehicle and Accident and Health business have attained significant premium growth. Underwriting performance improved from a loss of $473 million in 2001 to a profit of $1,243 million in 2002.

The long term insurance business continued to attain a double-digit annual growth from 1991 to 2002, with office premiums increasing by 15.2 per cent to $65.5 billion in 2002. The office premiums in force of Individual Life business amounted to $49.6 billion, accounting for 75.7 per cent of the total office premiums. The number of Individual Life policies in force grew by 5.9 per cent to 5.2 million in 2002.

At year-end, there were 32 099 insurance intermediaries, including 31 635 agents (of whom 1 973 are agency firms) and 464 brokers.

Insurance Authority

The Commissioner of Insurance, appointed by the Chief Executive as the Insurance Authority (IA), has the principal function (under the Insurance Companies Ordinance (ICO)) to regulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and for the protection of existing and potential policy holders.

The ICO, which prescribes a comprehensive regulatory framework for all classes of insurance business, has the 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.

85