On 26 October 2012, the Hong Kong government launched a three month public consultation on the key legislative amendments to the Insurance Companies Ordinance (Cap.41) for the establishment of an independent insurance authority (“IIA”). The IIA will replace the Office of the Commissioner of Insurance, a government department. The previous consultation exercise in respect of the proposed establishment of the IIA was launched in July 2010 and received a generally positive response from the public. The proposal for the establishment of the IIA is borne out of the government’s desire to enhance consumer protection, facilitate the stable development of the insurance industry, and bring Hong Kong in line with the international practice of financial regulators being operationally and financially independent from government.
Key legislative amendments in the latest consultation document cover the following areas:
- the introduction of a licensing regime for insurance intermediaries, which will replace the existing self-regulatory regime – broad principles of conduct requirements will be laid down for insurance intermediaries;
- the regulatory powers of the IIA – the IIA is to be vested with new statutory powers for the effective regulation of authorised insurers and insurance intermediaries, including inspection, investigation, imposing disciplinary sanctions, suspension etc., and it may apply for court orders to compel compliance with inspection and investigation requirements;
- the exercise of the regulatory powers by the IIA – this is to be subject to checks and balances, with the government proposing to establish an Insurance Appeal Tribunal (chaired by a person qualified for appointment as a High Court Judge) to consider appeals against the regulatory (including disciplinary) decisions of the IIA; and
- the financing of the IIA – the IIA is to be self-financed with income streams from licence fees, service charges to insurers and licensees and a proposed levy of 0.1% on all insurance premiums.
Subject to views received on the legislative amendments set out in the consultation document, the government plans to introduce an Insurance Companies (Amendment) Bill in 2013, with a view to establishing the IIA in 2015.