ENG-2003 — Page 123

FINANCIAL AND MONETARY AFFAIRS

sophistication of insurance products. There is also a rising public expectation for better protection for the insured. The IA considers that there is a need to enhance the existing system. The relevant self-regulatory organisations (SROs) were consulted on possible improvements to the existing regulatory regime. On the basis of the industry's comments, the IA is in the process of liaising with the SROS to implement a number of proposals. Some items of the proposed improvements have been implemented, such as the disclosure of registration number to facilitate identification of insurance intermediaries, and reinforcement of the requirements relating to policy replacement. The IA will continue to liaise with the industry and parties concerned to enhance the regulatory system for insurance intermediaries and further protect the interests of the insuring public.

In January 2003, legislation has been made to introduce a definition of 'Hong Kong Long Term Insurance Business' and a requirement to submit annual returns of such business. Besides promoting market transparency, and the integrity and comprehensiveness of the relevant statistics, this would also enable the IA to monitor the operation of long term insurers more effectively.

In the light of international regulatory trends and developments of the insurance. industry, the Government is reviewing the institutional set-up of the IA. The review entails a study on turning the IA into a regulatory agency independent of the Government. Relevant stakeholders are being consulted.

The IA had commissioned a consultancy study on the need and feasibility of establishing Policyholders' Protection Funds (PPFs) in Hong Kong. Stage 1 of the study which comprises a review of the existing regulatory regime and a feasibility study on establishing PPFs was largely completed. The IA issued in December 2003 a consultation paper inviting public comments by the end of March 2004. The Government is keeping an open mind on the PPF concept.

To examine the need for enhancing the supervisory framework of the assets of long term business insurers, the IA commissioned another consultancy study in September 2003. The study focuses on the appropriate framework for asset valuation and the need for a mechanism that better safeguards the interest of Hong Kong policy holders in the event of failures of long term insurers. The first stage of the study would be completed by early 2005. It would include a review of the existing regulatory framework as well as the international practice. Stakeholders will be consulted in the process.

Retirement Protection Schemes: Mandatory Provident Fund Schemes and Occupational Retirement Schemes

Main Features

On December 1, 2000, the Mandatory Provident Fund (MPF) System was implemented to help encourage the workforce to save and invest for their retirement protection. The system, which was formulated after extensive consultation, is a privately managed, employment-related mandatory system of provident fund schemes. Unless exempted, employees and self-employed persons aged between 18 and 65 are required to participate in MPF schemes.

The MPF system provides for joint contributions by the employer and employee, each contributing 5 per cent of the employee's relevant income to a registered MPF trust scheme, subject to the maximum and minimum levels of income for contribution

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