Since taking over as Hong Kong’s new insurance regulator in June of this year, the Insurance Authority (IA), has been tasked with modernising the regulatory framework as well as facilitating the development of the industry. In line with these objectives, in September 2017, the IA launched an Insurtech Sandbox, introduced a new fast track application procedure for online-only insurers seeking authorisation to conduct business in Hong Kong and entered into a cooperation agreement with the UK’s insurance regulator, the Financial Conduct Authority (FCA), to collaborate in supporting Fintech innovation.
On 29 September 2017, the IA launched the Insurtech Sandbox, a pilot scheme to permit existing Hong Kong authorised insurers to work with technology firms in trying out new insurtech applications for their business operations.
The Sandbox is subject to the following principles:
- The insurers must provide a viable framework for the trial of the application, by:
- Setting out the duration of the trial.
- Providing details of the size and type of insurance business involved.
- Identifying the target users.
- Identifying the insurtech and new technological initiatives involved.
- Identifying the success criteria of the trial.
An insurer which is trialing the application must also:
- Put in place adequate risk management controls.
- Ensure that adequate customer protection exists in relation to the trial, including by making it clear to customers that they are part of a trial.
- Maintain adequate resources.
- Present an appropriate exit strategy for the trial.
On 29 September 2017, the IA set up an expedited application process for insurers seeking authorisation to carry on insurance business in or from Hong Kong solely by way of digital distribution channels. This pilot scheme is known as “Fast Track”.
The scheme is aimed at the on-line sale of non-complex insurance products (such as travel and personal accident insurance) directly to consumers through digital distribution channels owned or operated by the insurers.
The following principles apply for the Fast Track. The insurer must:
- Own or operate the relevant digital distribution channel.
- Not use traditional agency channels (insurance agents, brokers or banks).
- Meet solvency/capital requirements.
- Demonstrate that there are protective measures in place for policyholders.
- Comply with stated shareholder requirements with regard to long term business, i.e. one of the shareholder controllers should be an insurer (or the subsidiary/affiliate of an insurer) authorised to carry on the relevant insurance business in Hong Kong or a jurisdiction which has an information exchange arrangement with the IA (such as the UK).
Fintech Co-operation Agreement between the FCA and the IA
On 12 September 2017, the FCA in the UK and the IA signed a Co-operation Agreement with a view to providing a framework for the exchange and referral of information on innovative fintech products and services.
The main objective is for both authorities to stay abreast of fintech innovation and to share information on a confidential basis with the possibility of joint projects being undertaken. Both will exchange and refer information in relation to emerging trends and developments and regulatory issues arising from fintech, and will provide each other with details of organisations which lead efforts to promote fintech innovation.
A copy of the Co-operation Agreement can be found at https://www.fca.org.uk/publication/mou/fca-ia-co-operation-agreement.pdf