ENG-2006 — Page 109

Financial and Monetary Affairs | 81

At year-end, there were 30 201

insurance

intermediaries, including

29 715 agents (of whom 1 815 were agency firms) and 486 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 to promote its general stability and protect existing and potential policy holders.

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, minimum share capital and solvency margin requirements, as well as the requirement for directors. and controllers of insurers to be fit and proper persons.

A general business insurer is also required to maintain assets locally to meet the claims of Hong Kong policyholders. For life insurance business, an appointed actuary system is in place 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, actuarial reports and other returns submitted by insurers and regular on-site visits. The IA may take appropriate action under the ICO against an insurer to safeguard the interests of policyholders. These measures include 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 winding-up of the

insurer.

Insurance intermediaries have been subject to regulation under the ICO since 1995. An insurance agent must be properly appointed by an insurer, who is required to comply with the Code of Practice for the Administration of Insurance Agents in appointing and controlling its agents. Moreover, an insurance broker must meet certain minimum requirements to become eligible for authorisation.

Self-regulatory measures are in place to strengthen 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 regime is in line with prevailing principles and standards. It has also established an Insurance Advisory Committee, as provided for in the ICO, comprising representatives drawn from the industry.

Recent Developments

The 1A reviews its regulatory framework from time to time to keep up with market development and international trends. In so doing, it maintains a close liaison with industry bodies and other regulators. Based on operational experience and a