The China Insurance Regulatory Commission (CIRC) and the Office of the Commissioner of Insurance (OCI) have signed an agreement to conduct equivalence assessment of the insurance solvency regulatory regimes of mainland China and Hong Kong.
The pact is called the Equivalence Assessment Framework Agreement on Solvency Regulatory Regime.
At present, both sides are developing their own enhanced risk-based solvency regulatory regimes with reference to their own circumstances and international benchmarks.
The agreement stipulates that the objectives of the equivalence assessment are to achieve mutual equivalence recognition of the solvency regulatory regimes in the two places and, on that basis, provide regulatory convenience over supervision of the insurance industry on both sides for avoiding regulatory overlap. It also stipulates the implementation procedures of the equivalence assessment, as well as the relevant transitional arrangements, to enhance the co-operation between the two regulatory bodies.
Hong Kong's Commissioner of Insurance, Mr John Leung, said: "The mutual equivalence recognition of the solvency regulatory regimes between the two places will promote the development of the insurance industry on both sides and encourage cross-border business.”
He said that the goal is to complete the equivalence assessment within four years.
Before the completion of assessment, both sides agreed on a transitional regulatory arrangement which recognises the solvency regime of each other as the same or similar to that of another. Mr Leung added the OCI will discuss with the CIRC specific measures under transitional arrangements.
CIRC Vice Chairman, Mr Chen Wenhui, said: "With the signing of the agreement, the two places will eventually achieve mutual equivalence recognition, which will enhance consensus, strengthen co-ordination and safeguard the common interests of the insurance regulators of both sides during the formulation of international solvency regulatory plans, and promote a fair and legitimate environment for the development of the insurance industry, so as to strengthen co-operation between the two insurance sectors, and enhance the regulatory efficiency and market effectiveness of both places."
Welcoming the signing of the agreement, the Hong Kong Federation of Insurers (HKFI) said: “The Hong Kong insurance industry is most encouraged by the positive steps taken by the local and mainland insurance regulators to try and achieve mutual equivalence recognition of the solvency regulatory regimes in the two places.”
Mr Peter Tam, Chief Executive of the HKFI, said: “This will enable Hong Kong to provide a much wider spectrum of quality reinsurance services for the mainland and help facilitate market development on both sides.”
Currently, a total of 18 reinsurers from around the globe operate in Hong Kong.
Mr Tam added: “The HKFI will provide our regulator with the necessary support to ensure timely completion of the exercise. This will benefit the mutual development of insurance and reinsurance businesses in both Hong Kong and the mainland and further reinforce the status of Hong Kong as an international reinsurance hub.”