The Insurance Authority (IA) today replaces the Office of the Commissioner of Insurance (OCI), a government department, to regulate insurance companies.
The IA is a regulatory body independent of the government and the industry. Empowered by the Insurance Ordinance, the IA's principal function is to regulate and supervise the insurance industry to promote the general stability of the insurance industry and protect policyholders.
Since its establishment in December 2015, the IA has been preparing for the takeover of regulatory functions in phases. The enhanced regulatory regime has expanded the scope of regulatory oversight over insurance companies.
Within two years, the IA will further take over the direct regulation of insurance intermediaries from the three self-regulatory organisations (SROs) through a statutory licensing regime, thus protecting policyholders in a more comprehensive manner. The three SROs are the Insurance Agents Registration Board, established under the Hong Kong Federation of Insurers; the Hong Kong Confederation of Insurance Brokers; and the Professional Insurance Brokers Association.
The Secretary for Financial Services and the Treasury, Professor K C Chan, said yesterday that the establishment of the IA is the most important regulatory reform in the insurance sector in the past 30 years since the passage of the Insurance Companies Ordinance in 1983.
The Chairman of the IA, Dr Moses Cheng, said: ”The IA strives to facilitate the sustainable development of the insurance industry and to better protect policyholders with a more holistic and effective regulatory system. Various initiatives, including the development of a Risk-based Capital Regime and the introduction of a Policy Holders' Protection Scheme, are in the pipeline. To tie in with the launch of the statutory licensing regime for insurance intermediaries, the IA will also set out conduct requirements and professional standards for practitioners by issuing codes and guidelines."
The IA will start off with about 180 staff, gradually expanding to about 300 when it starts regulating insurance intermediaries.
The establishment of the IA and its initial years of operation will be funded by the government. In the long run, the IA has to be financially independent of the government and recover its operating costs. The Insurance Ordinance provides for the IA to collect an annual authorisation fee from insurance companies and user fees for specific services with effect from today. Separate subsidiary legislation for the collection of a levy on premiums from policyholders with effect from 1 January 2018, has been submitted to the Legislative Council for vetting.
The IA website, www.ia.org.hk, is launched today. The OCI is disbanded today.