The Financial Services and the Treasury Bureau is proposing the establishment of an independent insurance authority to strengthen regulation of the industry.
A consultation paper on the "Proposed Establishment of an Independent Insurance Authority" was released by the Government on 12 July 2010 to invite public views on a proposal to establish an Insurance Authority (IA) to oversee the entire insurance industry in replacement of the Office of the Commissioner of Insurance (OCI). The proposed IA will be responsible for regulating insurance companies as well as insurance intermediaries such as brokers and agents.
The salient points of the consultation paper are as follows:
To reduce the impact on the industry, there will be cost-mitigating measures adopted in the first five years of the establishment of the IA, such as waiver of licence fees for insurance intermediaries directly licensed by the IA, and a gradual increase in the levy to be imposed on premiums.
The industry and the public are invited to express their views on the proposal during the 3-month consultation period, which shall end on 11 October 2010. A bill on the establishment of the IA is planned to be introduced to the Legislative Council in 2011. It is anticipated that if the market supports the proposal, the IA may be established as early as 2012 to 2013.
The Government's proposal for a single watchdog for the entire industry is a major development in insurance regulation in Hong Kong. This is a welcome development as it will streamline the regulation of the insurance industry in Hong Kong and bring the regulatory regime in line with international practice for regulators to be financially and operationally independent of the Government.
At this stage, the proposal is still subject to the consultation process. We anticipate that the regulation of the sale of insurance products by bank staff will attract attention as there will effectively be a dual watchdog over bank employees.
We will be following this proposal closely so watch this space.
For inquiries related to this Legal Update, please contact:
Tow Lu Lim ( )
Carrie Tai ( )
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