Body proposed to regulate insurance sector
Updated: 2010-07-13 07:47
By Oswald Chen(HK Edition)
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Secretary for Financial Services and the Treasury K.C. Chan (2nd right), Permanent Secretary for Financial Services and the Treasury (Financial Services) King-chi (2nd left), Commissioner of Insurance Annie Choi (right) and Deputy Secretary for Financial Services and the Treasury (Financial Services) Patrick Ho (left) attend Monday's press conference in Hong Kong. Provided to China Daily |
Govt to provide IA HK$500 million start-up lump sum
The Financial Services and the Treasury Bureau (FSTB) has issued a consultation paper on the proposed establishment of an independent Insurance Authority (IA) that will topple the existing self-regulatory practices of the local insurance industry, it was revealed at a press conference in Hong Kong on Monday.
The three-month public consultation that began Monday will gather views from the industry and the public. Then the government will draw up detailed legislative proposals and introduce a bill to the Legislative Council in 2011. If the legislative work can be finished according to schedule, the IA will be established in 2013 at the earliest.
Under the current self-regulatory system, the local insurance industry is regulated by three insurance-related trade bodies - the Hong Kong Federation of Insurers (HKFI), the Hong Kong Confederation of Insurance Brokers (HKCIB) and the Hong Kong Professional Insurance Brokers Association (HKPIBA). The problem is that these are non-statutory bodies with limited investigatory and sanctioning powers and varying regulatory standards. In addition, the issue of perceived and real conflict of interest is always lurking in the shadows under the current self-regulatory practices.
The FSTB has proposed that the new IA will be independent from the government structure. The IA will be endowed with required regulatory powers to issue direct licenses to insurers and insurance intermediaries under the IA's licensing regime, conduct routine supervision, inspection, and impose disciplinary sanctions.
Under the proposal, the current Office of the Commissioner of Insurance, which is a government department to supervise the local insurance industry, will be scrapped after the establishment of the IA.
"This proposal will enable better market regulation and thus help enhance protection for insurance policyholders, maintain market stability and competitiveness. These will help strengthen Hong Kong's status as an international financial center by following the international regulatory standards in the insurance industry," Secretary for Financial Services and the Treasury K.C. Chan said at the press conference.
Regarding insurance products sold through banks, since the business environment for insurance products at banks is unique, the administration proposed that the Hong Kong Monetary Authority (HKMA) should be given powers similar to those of the IA for regulating the conduct of bank employees selling insurance products.
"The HKMA will apply the same regulatory standards to regulate bank staff set out by the IA. However, the license revocation work will be conducted by the IA. This will ensure consistency in regulation and minimize waste of resources," Chan stressed.
The government has proposed governance mechanisms that will level checks and balances on the IA; for example, the IA will be managed by the Governing Board, of which the members come from different sectors. An independent Process Review Panel will be set up to ensure the IA will be consistent and fair when exercising its duties.
Regarding the funding mechanism, the government has proposed that the IA's annual operating cost will be around HK$240 million. The government will fork out a lump sum of HK$500 million for the IA on its inception. After five years, the IA should operate under the full-cost recovery principle.
"The industry welcomes the administration proposal, but we caution that the proposal may bring over-regulation and we worry that the Governing Board of the IA may not have sufficient (numbers of) insurance professionals to supervise regulation," legislator Chan Kin-por (Insurance) told China Daily.
"We are positive toward the government proposal and committed to whatever actions that are conducive to the professional development of the insurance industry," Peter Tam, chief executive of the HKFI, told China Daily, adding that the HKFI will communicate with the government regarding the implementation of the proposed details.
China Daily
(HK Edition 07/13/2010 page3)