In Hong Kong, the Insurance Authority (IA) will replace the Office of the Commissioner of Insurance (OCI), a government department, and will regulate insurance companies starting June 26, 2017. The OCI will be disbanded on the same day. Certain other pieces of subsidiary legislation, which were published in the Gazette on April 21, 2017, also take effect from June 26, 2017.
The IA is a regulatory body independent of the government and the industry. Empowered by the Insurance Ordinance (Cap. 41), the IA's principal function is to regulate and supervise the insurance industry to promote the general stability of the insurance industry and protect policy holders. Since its establishment in December 2015, the IA has been preparing for the takeover of regulatory functions in phases. The enhanced regulatory regime has expanded the scope of regulatory oversight over insurance companies. Within two years, the IA will further take over the direct regulation of insurance intermediaries from the three Self-Regulatory Organizations (SROs) through a statutory licensing regime, thus protecting policyholders in a more comprehensive manner. The three SROs are the Insurance Agents Registration Board (established under the Hong Kong Federation of Insurers), the Hong Kong Confederation of Insurance Brokers, and the Professional Insurance Brokers Association. Upon completing the changeover, the IA will start off with about 180 staff, gradually expanding to about 300 when it starts regulating insurance intermediaries.
The establishment of the IA and its initial years of operation will be funded by the government. In the long run, the IA has to be financially independent of the government and recover its operating costs. The Insurance Ordinance provides for the IA to collect an annual authorization fee from insurance companies and user fees for specific services with effect from June 26, 2017. The IA is required by law to set up two Industry Advisory Committees to advise it, one on matters relating to long-term business and one on general business. A separate subsidiary legislation for the collection of a levy on premiums from policy holders with effect from January 01, 2018 has been submitted to the Legislative Council for vetting.
Keywords: Asia Pacific, Insurance, Hong Kong, IA, OCI, Insurance Ordinance
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