IA of Hong Kong published the guideline GL-21 on enterprise risk management, or ERM, for insurers. The guideline sets out the objectives and requirements on ERM and the Own Risk and Solvency Assessment (ORSA), in addition to providing the impetus for insurers to establish effective tools to identify, monitor, manage, and mitigate risks. GL-21 shall take effect from January 01, 2020. Additionally, to monitor the overall progress of the industry in enhancing their ERM frameworks of insurers, IA is conducting a Preparation Status Survey that insurers are expected to complete on the best effort basis. Insurers are requested to complete the survey in Excel file format and have it returned to IA by August 16, 2019.
The main objective of the guideline GL-21 is to nurture a sound risk culture in the insurance industry that should be reflected in the values, attitudes, and norms of business behavior. The guideline sets out the requirements for Pillar 2 of the risk-based capital regime in Hong Kong and provides the impetus for authorized insurers to:
- Put in place a robust system of risk governance
- Proactively identify and assess their risk exposure
- Maintain sufficient capital to cover risks not captured or not adequately captured under Pillar 1
- Develop and enhance risk management techniques in monitoring and managing these risk exposures
IA has finalized the guideline on ERM, post two consultations—one consultation was conducted in May 2018 while the second was conducted in January 2019. IA issues GL-21 pursuant to section 133 of the Insurance Ordinance (Cap. 41) and its principal function is to regulate and supervise the insurance industry for the protection of existing and potential policy holders. This guideline takes into account the relevant Insurance Core Principles (ICPs), standards, guidance, and assessment methodology promulgated by IAIS. This guideline is part of the Pillar 2 of the risk-based capital regime for the insurance industry in Hong Kong. The risk-based capital regime in Hong Kong comprises three pillars: Pillar 1 covers the regulatory capital rules and requirements, Pillar 2 covers corporate governance and ERM, and Pillar 3 covers reporting and disclosure requirements.
Effective Date: January 01, 2020
Keywords: Asia Pacific, Hong Kong, Insurance, ERM, ORSA, Regulatory Capital, Pillar 2, ICP, Risk-Based Capital Regime, IA
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