What does the current insurance regulatory framework look like?
Hong Kong’s insurance brokers and agents previously worked under a self-regulatory regime until the Insurance Authority (IA) took over in June 2017. The insurance regulatory functions were handed from the Office of the Commissioner of Insurance to the IA to regulate insurance companies.
Hong Kong’s IA was established to meet the requirement of the International Association of Insurance Supervisors, which makes sure insurance regulators across the globe are completely independent of the industry and government.
On 14 May 2019, the IA issued a circular that, in short, said the IA would take over regulation from the three Self-Regulatory Organisations (“SROs”) on 23 September, 2019. The three SROs are:
- The Hong Kong Confederation of Insurance Brokers
- Professional Insurance Brokers Association
- The Insurance Agents Registration Board, established under The Hong Kong Federation of Insurers
Once the transition has been completed, the IA will be the sole independent insurance regulator in Hong Kong commencing on 23 September 2019.
What’s the IA done so far?
The IA has published 22 guidelines for insurers and 1 guideline for insurance brokers. They’ve also been working on the remaining provisions of the Insurance Companies (Amendment) Ordinance 2015. These provisions and other regulatory requirements will come into effect on 23 September 2019.
What’s coming up?
This marks the beginning of a new insurance regulatory regime. The IA will continue to set out other guidelines and finalise other codes in phases, to tighten rules and regulations. We expect the IA will focus on and put in place more stringent measures to prevent policy misselling amongst other areas such as anti-money laundering and enterprise risk management.
What does this mean?
Historically, the Hong Kong insurance industry has been self-regulated, but major changes are now being introduced to strengthen and provide consistency across the financial services sectors. Whilst the new regime will continue to develop and adapt, it’s important to start thinking about any gaps or deficiencies within your systems and controls, so you don’t get caught out on the rules and regulations that will come into effect soon.
As specialist regulatory compliance consultants in the financial services sector, we can help insurance intermediaries in Hong Kong manage their compliance and regulatory risks.