Hong Kong Government Proposes Independent Insurance Authority

The Hong Kong government announced a proposal to establish the Independent Insurance Authority as the main regulator for insurers and insurance intermediaries and the sole authority to outline conduct standards and regulatory requirements, including bancassurance operations, to ensure consistent regulation.

Following a public consultation, the IIA will work closely with the Hong Kong Monetary Authority on the regulation of bancassurance activities, noted the government.

The IIA will help improve and strengthen the present regulatory regime for better consumer protection, according to the Hong Kong Federation of Insurers. "It will be good for the healthy development of the insurance industry in the long term," said Alex Chu, chairman of the Hong Kong Federation of Insurers, in a statement.

To ensure the successful transformation of the regulatory regime, Chu said it is necessary to "set out clearly how the banking channels are to be regulated to ensure supervisory consistency and a level playing field for all insurance intermediaries."

The proposed creation of the IIA would align with international practice for financial regulators to be independent, both operationally and financially, of government and industry. "The IIA would help reinforce Hong Kong's position as an international financial center," said K.C. Chan, secretary for financial services and the Treasury of Hong Kong, in a statement.

To reduce the impact on insurers and policyholders, the government also proposed to cap the market levy on nonlife insurance policies with annual premiums at or about HK$5 million (US$64 million), and life insurance policies with single or annualized premiums at or above HK$100,000. The government proposed to exempt reinsurance contracts from the levy.

These measurers would sustain the competitiveness of the insurance industry, said the Hong Kong government. "We will continue to engage the insurance industry and relevant stakeholders during the next phase of work in drafting the legislation," said Chan.

The draft key legislative provisions are expected to be available in early 2012 for further engagement with stakeholders, according to the Hong Kong government.

Currently, the Hong Kong insurance industry is regulated by the Office of the Commissioner of Insurance, a government body led by the commissioner of insurance, Annie Choi.

In the first quarter of 2011, the Hong Kong insurance industry reported total gross premiums of HK$56.3 billion, up 13.3% over the same period in 2010, noted the OCI.

(By Rebecca Ng, Hong Kong news editor: [email protected])