Hong Kong's new Independent Insurance Authority (IIA) is expected to become operational at the end of 2016. It will transition from the existing regulatory regime to the new regime. The IIA will take over the Commissioner of Insurance's existing functions and assume the regulatory role of three self-regulating organisations (ie, the Insurance Agents Registration Board under the Hong Kong Federation of Insurers, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association). The IIA will play an enforcement role as the regulatory watchdog of insurers and insurance intermediaries in Hong Kong, with the aims of improving the protection for policy holders, introducing stricter regulations and enhancing public confidence in the Hong Kong insurance industry.

In the meantime, changes to insurance industry regulation are already underway. On October 7 2016 the Office of the Commissioner of Insurance issued the revised Guidance Note on the Corporate Governance of Authorised Insurers (GN10), which takes effect from January 1 2017. The underlying objective of GN10 is to enhance the integrity of Hong Kong's insurance industry by providing guidance to insurers for the evaluation and establishment of their internal practices and procedures. It sets out the minimum standard of corporate governance that is expected of an authorised insurer and the general guiding principles of the existing insurance authority.

GN10 was first issued in July 2002 and was last updated in March 2014. The new updates have been added to reflect the standards which have been adopted internationally. Insurers in Hong Kong are generally required to comply with GN10.

Guidance Note 10


Previously, an overseas insurer that generated more than 75% of its annual gross premium from Hong Kong insurance business had to observe GN10. Under the new GN10, the annual gross premium level is 50%.

Captive insurers were previously exempt from compliance with GN10, but are now encouraged to adopt the new GN10.

Governance structures

Board of directors

At least one-third of the board of directors must have a good working knowledge of insurance in order to effectively oversee the activities of an insurer. Previously, it was advisable for the board to have expertise in other areas (eg, finance and investment), but this has now been expanded to include "an adequate spread" in other areas of expertise, including underwriting, claims and actuarial.

The new GN10 requires that at least one-third of the board be comprised of independent non-executive directors. This is higher than the previous one-fifth requirement.

Senior management

The new GN10 includes a section on senior management, which now distinguishes its responsibilities from those of the board. While the board has the ultimate responsibility for setting the business objectives, strategies and policies for the insurer, senior management is now accountable for carrying out the day-to-day operations and implementing systems and controls.

Chairman and chief executive

In the old GN10, an appointed actuary and chief executive could hold these two positions at the same time, provided that sufficient safeguards were in place. Under the new GN10 and to avoid conflicts of interest, an appointed actuary should not simultaneously act as chairman and chief executive.

Role and responsibilities of board

The new GN10 differentiates between the roles of individual directors and chairman of the board. Individual directors owe a fiduciary duty to the insurer, while the chairman of the board has the leading role to ensure the board's proper and effective functioning. To avoid conflicts of interests, the chairman of the board should not act as the chief executive or the appointed actuary or serve as chair of any board committees (eg, the audit committee, investment committee and nomination committee).

Servicing clients

At the heart of this section is fair treatment of customers. Insurers should clearly set out proper policies and procedures regarding servicing customers, including disclosure of policy benefits, risks and responsibilities, pricing of insurance policies, handling of customers' complaints and settling of insurance claims. The new GN10 requires that such policies and procedures be made available to the insurance authority on request.

Risk management and internal control systems

The new GN10 has been expanded to include guidance on cybersecurity and business continuity planning.


The new GN10 advises insurers to have policies and procedures in place to protect the personal information of its policy holders and the storage of digital and electronic business data. Insurers should have mitigation measures in place to prepare for possible cybersecurity threats and regularly review and assess cybersecurity policies and procedures, as well as monitoring their implementation.

Business continuity planning

Insurers are advised to maintain business continuity policy and business continuity plans. Plans should include viable measures and actions that the insurer can take to continue and restore its position when under distressed conditions.

An insurer must inform the insurance authority promptly in circumstances where it needs to activate the business continuity plans. It must provide details of the disruptions and measures taken, potential effects and the target recovery time. Progress reports should be provided to the insurance authority until business activities are restored.


The new GN10 places strong emphasis on risks and controls. The underlying objectives of the GN10 are centred on the protection of policyholders' interests, the long-term stability of the Hong Kong insurance market and the enhancement of Hong Kong's status as an international financial centre.

The Insurance Companies (Amendment) Ordinance 2015 clarifies that the new IIA will have investigatory, disciplinary and sentencing power. It is likely that the new GN10 will remain inforce after the IIA becomes operational. It would therefore be prudent for both insurers and intermediaries to to familiarise themselves with the updated GN10 in advance to ensure compliance with the new regulatory regime.

For further information on this topic please contact Kevin Bowers or Michael Withington at Howse Williams Bowers by telephone (+852 2803 3648) or email ( or The Howse Williams Bowers website can be accessed at

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