The recent consultation paper issued by the Financial Services and the Treasury Bureau (FSTB) updates the proposals for the establishment of an Independent Insurance Authority for Hong Kong (IIA). It heralds a significant change to the regulatory regime for authorised insurers (insurers) and insurance intermediaries (agents and brokers) in Hong Kong and maps out a timetable for the introduction of the necessary legislative changes.
What are the key objectives of the IIA? How will it exercise its new powers? How will it regulate insurance intermediaries? Should insurers and insurance intermediaries be taking any action now?
Although the consultation paper only sets out the current proposals to amend the Insurance Companies Ordinance (ICO), these are very similar to the proposals made last year. It is likely that these proposals will now form the basis of a bill to amend the ICO, which is expected to be enacted in mid to late 2013. It is therefore an opportune time to examine the proposals and the impact they will have on the insurance industry in more detail since, although they may be refined as the consultation continues, it is very likely they will become law in substantially this form unless strong objections are raised to the contrary.
As the Insurance Commissioner has made clear in her road shows outlining these proposals; the insurance industry had better speak now or forever hold its peace.
FSTB's main objectives
In amending the ICO, the FSTB has a number of important objectives:
- To replace the existing Insurance Authority with a new regulatory body for the insurance industry in Hong Kong that is financially and operationally independent of government
- To introduce a statutory licensing regime for insurance intermediaries (including banks)
- To modernise the insurance regulatory infrastructure by giving the IIA additional powers of oversight, inspection, investigation, discipline and prosecution
These changes will take time. The proposals acknowledge this by allowing for:
- A lead in time for the establishment of the IIA (presently forecast to be two years)
- A gradual increase in fees over six years
- The grandfathering of existing intermediary licenses for the first three years after the commencement of the amendments
Timeline and next steps
The consultation period will end on 26 January 2013. A bill to amend the ICO is expected to be available sometime later in 2013. We will provide a further update once the bill is issued. In the meantime, if you require any additional information on these proposals or the impact they may have on you or your business, please contact us.
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