The Insurance Authority (IA) has launched a two-month public consultation on draft rules for licensed insurance brokers.
The draft Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules are mainly modelled on the relevant requirements for insurance brokers set out in the Guideline on Minimum Requirements for Insurance Brokers issued by the IA in 2017. The draft Rules set out the requirements in relation to:
- (i) paid-up capital and net assets,
- (ii) professional indemnity insurance (PII),
- (iii) keeping of separate client accounts,
- (iv) keeping of proper books and accounts and
- (v) submission of audit and related information.
Since the existing requirements were set some two decades ago, the IA proposes to update and refine certain requirements to take into account price level changes and other developments to enhance protection for policy holders and foster sustainable development in the insurance sector.
The major proposals include raising the minimum amounts of paid-up capital and net assets of an insurance broker company (from HK$100,000 [$12,775] to HK$500,000) and the amount of minimum indemnity limit (from HK$3m to HK$5m) for its PII. Such proposals will help ensure that an insurance broker company has sufficient financial resources to meet its operational needs and potential claims for professional negligence against it.
The draft Rules will be effective upon the commencement of the new regulatory regime for insurance intermediaries and applicable to newly licensed insurance broker companies.
In relation to existing insurance brokers, the IA proposes to provide a transitional period of some three years to ensure they have sufficient time to raise their paid-up capital and net assets, and to arrange the PII. Detailed transitional arrangements are set out in the draft Rules.