ENG-2017 — Page 119

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Financial and Monetary Affairs

As a member of the International Association of Insurance Supervisors, Hong Kong is required to observe international principles and standards in its insurance supervisory regime. The IA works closely with regulators in other jurisdictions in regulating major insurance groups and takes part in supervisory colleges organised by the home regulators of such groups.

Recent Developments

To achieve full cost recovery in the long run, the IA will start collecting a levy of 0.04 per cent on insurance premiums from policyholders through insurance companies from 1 January 2018. The levy rate will increase gradually until it reaches the target level of 0.1 per cent in 2021-22. A levy cap applies in each policy.

The IA has been closely monitoring the development and application of technology in the insurance industry (insurtech) and helping market participants tackle insurtech-related regulatory issues. The various initiatives launched include:

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⚫ the Insurtech Sandbox to facilitate a pilot run of innovative insurtech applications by

authorised insurers to be applied in their business operations;

• a Fast Track for Applications for Authorisation of New Insurers Owning and Operating Solely Digital Distribution Channels - a pilot scheme to expedite applications for new authorisation as a means to promote insurtech development in Hong Kong;

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⚫ an insurtech facilitation team to enhance communication with businesses involved in the development and application of insurtech in Hong Kong, and to promote Hong Kong as an insurtech hub in Asia. Following the team's efforts, the IA entered into a cooperation agreement with the UK Financial Conduct Authority on 21 September and the Dubai Financial Services Authority on 7 December to enhance collaboration in supporting fintech innovation; and

• a Working Group on Embracing Fintech in Hong Kong under Future Task Force to explore the future of the insurance sector and draw up recommendations.

Mandatory Provident Fund System

As one of the pillars of retirement protection, the MPF System helps the Hong Kong workforce set aside savings for retirement. Unless exempted, employees and self-employed persons (SEPs) aged 18 to 64 are required to join an MPF scheme. At the end of 2017, about 85 per cent of the employed population were covered by the MPF System or other forms of retirement schemes.

The MPF System is employment-based. An employer is required to contribute 5 per cent of an employee's relevant income (RI) as mandatory contribution for the employee, subject to a maximum RI level. Employees are required to make the same amount of contributions for themselves unless their Rls are below the minimum level. SEPs must also contribute 5 per cent of their Rls, subject to the minimum and maximum levels.

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