The independent Insurance Authority (IA) will take over regulation of authorised insurance companies from the Office of the Commissioner of Insurance (OCI) with effect from 26 June 2017.
The Insurance Companies (Amendment) Ordinance 2015 (Commencement) Notice 2017 (the Notice) was gazetted on 21 April 2017. The Notice sets 26 June 2017 as the date on which various provisions of the Insurance Companies (Amendment) Ordinance 2015 comes into effect. On this date:
Various subsidiary legislation will also be amended with effect from 26 June 2017. A consequence is that the fees payable for authorisation of an insurer and the annual fees payable by authorised insurers will increase substantially. Annual fees will consist of a fixed fee of HK$300,000 and a variable fee calculated as a percentage of insurance liabilities (as defined). The variable percentage fee will increase from 0.0001% of insurance liabilities for 2017-18 to 0.0039% of insurance liabilities for 2022 – 23 and all years thereafter. There will also be additional fees payable of up to HK$100,000 for each application for approval of a controller that will have the power to exercise 50% or more of the voting power of the authorised insurer and of HK$18,000 for each application for approval of a director, a key person in a control function or an appointed actuary.
The Government has appointed Mr. John Leung Chi-yan, the current Commissioner of Insurance, as the CEO of the IA and has appointed four executive directors of the IA to oversee long term business, general business, market conduct and policy and development. The Government press release noting the appointments is here.
Transfer of the existing regulatory functions of the OCI to the IA and expansion of the powers of regulation over authorised insurers marks stage two of the implementation of the Insurance Companies (Amendment) Ordinance 2015. Stage three, the change in regulation of insurance agents and insurance brokers from the existing industry self-regulatory model to direct regulation by the IA, is expected to take effect within the next two years. Once stage three is complete, insurance intermediaries will need to be licensed by, and will be subject to direct regulation by, the IA. As a result, the regulatory framework for intermediaries will be closer to the securities and futures markets, where intermediaries are licensed by, and subject to direct regulation by, the Securities and Futures Commission.