Q: How have you seen the role of HKFI grow over the years?
Since its establishment in 1988, HKFI has grown from an industry body representing and promoting the interests of insurers to a self-regulator of insurance agents as well as a public educator on insurance matters. HKFI has been a close partner of the regulator and the government in promoting the development of the insurance industry.
Over the past 30 years, HKFI has played a key role in tackling a wide variety of topical issues and launched a number of initiatives to enhance the professional competence and business ethics of local insurance practitioners. Besides, HKFI helps resolve constraints faced by the industry such as talent shortage.
Since 2015, HKFI has launched the Young Insurance Executive Development Programme (YIE) together with insurers to offer trainee positions across a wide range of business fields, from actuarial and claims to underwriting, policy administration and customer service. HKFI has also been actively participating in international events and supported the International Union of Marine Insurance (IUMI) to set up its Asian Hub and first presence outside Europe in 2017.
Q: How will IA collaborate with HKFI to promote industry development and strengthen consumer protection?
The IA values comments from the industry and other stakeholders. HKFI, being the vital link between the IA and the industry, has been performing the role very well to bridge the gap and facilitate effective communication.
As the IA is working on a number of important initiatives, such as the statutory licensing regime for insurance intermediaries, the risk-based capital (RBC) regime and the new legislation for the Policyholders’ Protection Scheme, to name a few, we count on HKFI to continue giving us useful feedback for further improving our proposals.
HKFI has been working hard to strengthen consumer protection in recent years. For example, it played a key role in expanding the service of the Insurance Complaints Bureau earlier this year from adjudicating claim-related complaints to resolving non-claim related insurance disputes through mediation. As IA will take up direct regulation of insurance intermediaries in mid-2019, we will continue to work with HKFI and two brokers bodies to ensure a smooth transition to the new regime. The IA will also cooperate closely with HKFI to enhance public education on insurance products through traditional and social media.
What have been the biggest changes to the HK insurance scene during your time as the regulator?
I believe most in the insurance industry would agree that the establishment of the Insurance Authority (IA) in 2015 has marked a new milestone in the development of the insurance industry in Hong Kong. It means a modernised regulatory infrastructure to protect the interests of policy holders, and a new role taken up by the regulator to facilitate sustainable market development of the industry.
The transition to an independent regulatory framework is no easy task, but thanks to the support from HKFI and other industry stakeholders, it has been a smooth one. We are now building up our strength through recruiting more staff to perform new functions like licensing, investigation and disciplinary work arising from the new statutory licensing regime for insurance intermediaries.
Another big change that we have all witnessed is the development of InsurTech, especially in recent years. Insurers are looking beyond protection and proactively exploring areas for prevention of risks with the use of InsurTech, like health monitoring devices and telematics. These demonstrate how the combination of advanced analytics and censor technologies could enhance customer experience and insight into customer behaviour and related risks.
The InsurTech world is forever changing and the change is fast, so both the industry and the regulator have to be agile enough to drive change and embrace innovation. The IA is committed to building a regulatory environment that is conducive to the promotion of InsurTech. We look forward to seeing more collaborations between insurers and technology companies to bring about growth in the market.
Q: What challenges do you foresee for the regulator in the years ahead?
The IA is tackling a wide range of challenging tasks. First is the introduction of the RBC regime tentatively in 2021-2022. We have just received industry feedback on the draft guideline on enterprise risk management (ERM) and are working with industry stakeholders to launch the second quantitative impact study in August. Our aim is to implement the new ERM guideline and finalise the detailed RBC rules in 2020. We expect close collaboration with the industry in the development and implementation of the relevant regulations.
Meanwhile, we are liaising with HKFI, the insurance industry and the Hong Kong Institute of Certified Public Accountants closely to tackle various implementation issues arising from the adoption of IFRS 17. We hope to help minimise the stress on the industry during the transition period.
Another challenging task is to prepare for the statutory licensing regime for intermediaries. With its implementation, the IA will handle license applications, monitor intermediaries’ ongoing compliance, conduct inspection and investigations and impose disciplinary sanctions. Public consultation of the rules, regulations, codes and guidelines will be conducted in the second half of this year in phases.
On the development of InsurTech, while the IA strives to embrace technology and innovation, as a regulator we have to keep pace with the market and identify related risks. The tremendous increase in digital connectivity results in an ever-rising level of insurers’ exposure to cyber threats. The IA is developing a draft guideline on cyber security to promote prudent cyber risk management and controls among insurers. We have set up an expert panel involving IT experts from consultant firms, academia and professional bodies to help us pursue this.
Q: What can HK do to cement its position as a leading insurance hub in the years ahead?
The Belt and Road Initiative (BRI) is creating enormous new business opportunities in large-scale infrastructure and investment projects. Hong Kong’s insurance industry is well positioned to seize these opportunities by providing professional risk-management services and effective coverage to BRI projects, and the IA is committed to encouraging insurance and reinsurance placement in Hong Kong by the related stakeholders.
To promote industry participation in BRI projects, IA will establish an insurance-facilitation platform by the end of this year to line up all stakeholders together and form a cluster of service providers in the value chain whereby insurance brokers, insurance and reinsurance companies, captive insurers and captive managers can help project investors to map out their insurance needs. We hope that it can serve as an integrated resource centre for the partners to share important business information.
Another focus is to promote Hong Kong as an ideal place for setting up captives. We will organise and attend seminars and roadshows to share with mainland Chinese enterprises about the advantages of having their captives based in Hong Kong, particularly to help manage their risks along the belt and road and in other overseas markets. The Hong Kong government has just extended tax concessions from offshore business to include onshore business of both professional reinsurers and captive insurers in Hong Kong so that all the profits generated by them in Hong Kong would be subject to a half tax-rate of 8.25%. We hope to have more foreign and mainland insurance and reinsurance service providers set foot here to meet the rising demand.
Speaking of reinsurance, the China Banking and Insurance Regulatory Commission (CBIRC) has agreed to provide preferential treatment to Hong Kong reinsurers. Under the equivalence assessment framework agreement on the solvency regulatory regime between the mainland and Hong Kong, a lower capital charge will be applied to mainland insurers if they cede business to qualified reinsurers in Hong Kong. This measure will strengthen the competitiveness of Hong Kong professional reinsurers.
There are immense opportunities in front of us. The IA will continue to work closely with our industry stakeholders to explore how to get hold of them, and to strengthen the position of Hong Kong as a leading insurance hub. A
It has been an amazing 30 years. I especially remember my time as Legislative Council member for the Insurance Functional Constituency, from 1998 to 2008.
In 2001, there was 9-11, which raised specific concerns in the industry in Hong Kong and other major cities about coverage for terror attacks. And then there was the 2003 SARs outbreak, which highlighted such issues as employee compensation in private hospitals in the face of unknown diseases. Both these tragedies focused the industry and the wider community on the role insurance plays in modern society.
It has also, of course, been a time of great economic progress for Hong Kong and China, which has created significant opportunity for the insurance industry. The future will no doubt require us to meet new and unexpected needs – and I am sure that with the HKFI’s help we will see continued success.
The Hon Bernard Chan, GBS, JP
Convenor of Non-Official Members of Executive Council of Hong Kong
HKFI is my most important partner in performing my role as the representative for the Insurance Functional Constituency. HKFI has actively gathered ideas and comments of the insurance industry and proposed the best way forward. All these recommendations or proposals are of high quality and balance the interests of consumers and industry. For instance, in order to ensure that the Insurance Companies (Amendment) Bill 2014 enabling the set up of the new Insurance Authority is acceptable to the Insurance Industry and fit for purpose, the HKFI had prepared numerous comments on the Bill which were extremely useful for me to voice out in the Bills Committee. Outside the Legislative Council, HKFI and I had many meetings with many senior government officials and other industry bodies. After 14 months of hard work, the government finally introduced many technical amendments to address the concerns of the industry and the Bill was finally passed in April 2015. HKFI has been the most important voice of the insurance industry and will continue to do so in the years to come.
The Hon K P Chan, GBS, JP
Member of Legislative Council of Hong Kong