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Frequently Asked Questions > Insurance Industry

Insurance Industry

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Q1
What sectors of the insurance industry are regulated in Hong Kong?
A1
Only insurers and insurance intermediaries, i.e. insurance agents and insurance brokers, are regulated in Hong Kong.
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Q2
What is the law regulating the insurance industry and who is responsible for the regulation?
A2
The relevant legal framework for the regulation of insurers is provided by the Insurance Companies Ordinance (Cap.41), and its subsidiary legislation including Insurance Companies (Determination of Long Term Liabilities) Regulation, Insurance Companies (Margin of Solvency) Regulation and Insurance Companies (General Business) (Valuation) Regulation. The same Ordinance also provides a legal backing for the self-regulatory system of insurance intermediaries. The Commissioner of Insurance, in his role as the Insurance Authority, is responsible for the regulation of the insurance industry.
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Q3
What is the principal function of the Insurance Authority ("IA")?
A3
The principal function of the IA is to regulate the insurance industry for the protection of existing or potential policy holders and the promotion of the general stability of the insurance industry. He is however not involved with the daily operations of an insurer, including determination of the terms and conditions of insurance policies or the fixing of premium rates. The IA works closely with the insurance industry to encourage the provision of better services to the insuring public and greater transparency in an insurer's operations. For example, the IA has been working closely with the insurance industry to implement the Insurance Intermediaries Quality Assurance Scheme with a view to enhancing the professional standard of insurance intermediaries. Under the Scheme, insurance intermediaries, their responsible officers/chief executives and technical representatives are required to pass the Insurance Intermediaries Qualifying Examination conducted by the Vocational Training Council, unless otherwise exempted, before they can be registered or authorized as such. Thereafter, they are required to attend continuing professional development programmes.
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Q4
How many insurers are authorized in Hong Kong and how are they distributed by types of insurance business and countries of incorporation?
A4
As at 30 June 2015, 158 insurers (approximately 60% general business insurers, 28% long term business (or life) insurers and 12% composite insurers) were authorized in Hong Kong. Of these insurers, 86 were companies incorporated in Hong Kong while the rest come from 22 different countries/regions, with Bermuda (12) and UK (12) taking the lead, to be followed by USA (11).
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Q5
How many insurance brokers and agents are there in Hong Kong?
A5

As at 30 June 2015, there were 684 authorized insurance brokers and 9,253 registered chief executives/technical representatives. For insurance agents, there were 51,144 appointed insurance agents (i.e. 2,487 insurance agencies and 48,657 individual agents) and 27,439 responsible officers/technical representatives.

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Q6
What is the size of insurance business in Hong Kong and how are they distributed between General and Long Term Business?
A6
Total gross premiums of insurance business in 2013 amounted to HK$299.5 billion.
Insurance Business
2011
HK$m
2012
HK$m
2013
HK$m
General Business - Gross Premium
34,835
39,205
41,798
Long Term Business - Office Premium
198,915
224,124
257,717
Total
233,750
263,329
299,515

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Q7
What are the major classes of insurance business and their respective market share?
A7
For general business, accident and health (26%), general liability (26%), property damage (21%) and motor vehicle (11%) business are the major lines of business in terms of gross premiums for 2013.

For long term business, individual life business (93%) is the most important line in terms of office premiums for 2013, to be followed by retirement scheme management (3%). As at the end of 2013, 10.4 million individual life policies were in force.

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Q8
What are insurance agents, their responsible officers and technical representatives?
A8

An insurance agent means as a person who holds himself out to advise on or arrange contracts of insurance in or from Hong Kong as an agent or subagent of one or more insurers. A person shall not hold himself out as an insurance agent unless he has been properly registered. Besides, a person shall not act both as an insurance agent and broker at the same time.

A responsible officer of an insurance agent generally means a person who is responsible for the conduct of the insurance agency business of such insurance agent. For detailed definition of responsible officer, you may refer to the Code of Practice for the Administration of Insurance Agents issued by The Hong Kong Federation of Insurers. Their telephone number is (852) 2520 1868.

A technical representative of an insurance agent means a person, not being an insurance subagent, who provides advice to a policy holder or potential policy holder on insurance matters for such insurance agent, or arranges contracts of insurance in or from Hong Kong on behalf of that insurance agent.

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Q9
How are insurance agents, their responsible officers and technical representatives being regulated?
A9

Under the self-regulatory system of insurance intermediaries, insurance agents, their responsible officers and technical representatives need to be registered with and monitored by the Insurance Agents Registration Board set up by The Hong Kong Federation of Insurers in accordance with the Code of Practice for the Administration of Insurance Agents.

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Q10
What are insurance brokers, their chief executives and technical representatives?
A10

An insurance broker means a person who carries on the business of negotiating or arranging contracts of insurance in or from Hong Kong as the agent of the policy holder or potential policy holder or advising on matters related to insurance agents. A person shall not hold himself out as an insurance broker unless he has been properly authorized. Besides, a person shall not act both as an insurance agent and broker at the same time.

A chief executive of an insurance broker generally means a person who is responsible for the conduct of the insurance broking business of such insurance broker. For detailed definition of chief executive, you may refer to the "Minimum Requirements" for insurance brokers specified by our Office.

A technical representative of an insurance broker means a person who provides advice to a policy holder or potential policy holder on insurance matters for such insurance broker, or negotiates or arranges contracts of insurance in or from Hong Kong on behalf of that insurance broker for a policy holder or potent of policy holder.

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Q11
How are insurance brokers, their chief executives and technical representatives being regulated?
A11

Under the self-regulatory system of insurance intermediaries, an insurance broker needs to be either authorized by our Office or become a member of one of the two approved broker bodies, namely The Hong Kong Confederation of Insurance Brokers ("HKCIB") and Professional Insurance Brokers Association ("PIBA"). Their chief executives and technical representatives are also required to be registered similarly with our Office or the relevant broker body. The telephone number of the HKCIB is: (852) 2882 9943. For PIBA, the telephone number is: (852) 2869 8515.

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Q12 What is the Mainland and Hong Kong Closer Economic Partnership Arrangement ("CEPA")? What are offered to the insurance industry under CEPA? For the purposes of CEPA, how to apply for a Certificate of Hong Kong Service Supplier ("HKSS")?
A12

Meaning of CEPA

The CEPA is an arrangement whereby a form of free trade area is established between the Mainland and the Hong Kong Special Administrative Region ("HKSAR"). The CEPA covers three broad areas, namely trade in goods, trade in services, and trade and investment facilitation.

Terms of CEPA - Insurance Industry

In respect of the insurance sector, the Mainland accords Hong Kong service suppliers the following concessions:

With effect from 1 January 2004:

  1. To allow groups formed by Hong Kong insurance companies through re-grouping and strategic mergers to enter the Mainland insurance market subject to established market access conditions (total assets held by the group of over US$ 5 billion; more than 30 years of establishment experience attributable to one of the Hong Kong insurance companies in the group; and a representative office established in the Mainland for over 2 years by one of the Hong Kong insurance companies in the group).
  2. The maximum limit of capital participation by a Hong Kong insurance company in a Mainland insurance company is 24.9%.
  3. To allow Hong Kong residents with Chinese citizenship, after obtaining the Mainland's professional qualifications in actuarial science, to practise in the Mainland without prior approval.
  4. To allow Hong Kong residents, after obtaining the Mainland's insurance qualifications and being employed or appointed by a Mainland insurance institution, to engage in the relevant insurance business.

With effect from 1 January 2008:

  1. To permit the setting up of an examination centre in Hong Kong for the Mainland qualifying examinations for insurance intermediaries.
  2. To allow Hong Kong insurance agency companies to set up wholly-owned companies in the Mainland to provide insurance agency services for the Mainland insurance companies. (Note: Please refer to 《 關 於 香 港 、 澳 門 保 險 代 理 公 司 申 請 在 內 地 設 立 獨 資 保 險 代 理 公 司 有 關 事 項 的 公 告 》 issued by the China Insurance Regulatory Commission on 27 December 2007 for the detailed requirements)

With effect from 1 April 2012:

  1. To allow Hong Kong insurance brokerage companies to set up wholly-owned insurance agency companies in Guangdong Province (including Shenzhen) on a pilot basis. The place of operation should be in Guangdong Province (including Shenzhen), and the applicant must fulfill the following criteria:
    1. The applicant should have been operating insurance brokerage businesses in Hong Kong for over 10 years;
    2. The applicant's average annual business revenue for the past 3 years before application should not be less than HK$500,000 and the total assets as at the end of the year before application should not be less than HK$500,000;
    3. Within 3 years before application, there has been no serious misconduct and record of disciplinary action; and
    4. The applicant should have set up a representative office in the Mainland for over one year.
  2. To support Hong Kong insurance companies to enter the market through setting up business institutions or capital participation, so as to participate and share in the development of the Mainland insurance market.  To enhance bilateral cooperation in areas such as development of insurance products, business operation and operational management, etc.

With effect from 29 August 2013:

    To actively support qualified Hong Kong insurers to take part in compulsory traffic accident liability insurance business in the Mainland. Applications made by Hong Kong insurers will be actively considered and facilitation will be provided in accordance with relevant rules and regulations.

With effect from 1 March 2015:

    In respect of the mode of “commercial presence” in Guangdong Province, national treatment will be applied to service suppliers of the Hong Kong insurance sector except the following reserved restrictive measures:

    1. Hong Kong insurance companies and their groups formed through re-grouping or strategic mergers which enter the Mainland insurance market must fulfil the following criteria:
      1. Total assets held by the group of over US$5 billion; more than 30 years of establishment experience attributable to one of the Hong Kong insurance companies in the group; and a representative office established in the Mainland for over 2 years by one of the Hong Kong insurance companies in the group;
      2. The  place of their domicile is having a robust insurance regulatory system; and the insurance companies are under effective supervision by the relevant authority where the insurance companies are domiciled;
      3. Having met the solvency margin standard of the place where they are domiciled;
      4. Their application has had the agreement of the relevant authority of the place where they are domiciled;
      5. Reasonable corporate governance; and stable risk management system;
      6. Healthy internal control system; and effective information management system; and
      7. Good operating condition; and having no record of significant violation of laws and regulations.
    2. The maximum limit of shareholding percentage of a Hong Kong insurance company in a Mainland insurance company is 24.9%. Foreign financial institutions to invest in shares of insurance companies must fulfil the following criteria:
      1. A good and stable financial condition with continuous profit making record for the recent three consecutive accounting years;
      2. The total assets as at the end of the most recent year shall be not less than US$2 billion;
      3. Having long term credit rating of A or above given by international credit agencies in the recent three years;
      4. Having no records of significant violation of laws and regulations for the recent three years; and
      5. Having fulfilled the requirements of prudential supervision standards of the financial regulators where they are domiciled.
    3. An insurance company which carries on life insurance business in the Mainland and is jointly established by foreign insurance companies and Mainland domestic companies and/or enterprises (hereinafter called “jointly-owned life insurance company”) shall have no more than 50% of its total share capital coming from foreign source. Foreign insurance companies having shares in the jointly-owned life insurance company, directly or otherwise, whose proportion of share capital shall not exceed the limit as aforesaid.
    4. The total equity owned by Mainland domestic insurance companies in an insurance asset management company shall be not less than 75%.
    5. Hong Kong insurance agency companies setting up wholly-owned insurance agency companies to provide insurance agency services for the Mainland insurance companies must fulfil the following criteria:
      1. The applicant must be a Hong Kong insurance agency enterprise;
      2. Having been operating insurance agency business for over 10 years; the applicant's average annual business revenue for the past 3 years before application shall not be less than HK$500,000 and the total assets as at the end of the year before application shall not be less than HK$500,000; and
      3. Within 3 years before application, there has been no serious violation of regulations and record of disciplinary action.
    6. Hong Kong insurance brokerage companies setting up wholly-owned insurance agency companies must fulfil the following criteria:
      1. The applicant shall have been operating insurance brokerage business in Hong Kong for over 10 years;
      2. The applicant's average annual business revenue for the past 3 years before application shall not be less than HK$500,000 and the total assets as at the end of the year before application shall not be less than HK$500,000; and
      3. Within 3 years before application, there has been no serious violation of regulations and record of disciplinary action.
    7. Hong Kong insurance brokerage companies setting up wholly-owned insurance brokerage companies must fulfil the following criteria:
      1. Total assets of over US$200 million;
      2. Operating experience of over 30 years; and
      3. A representative office established in the Mainland for over 2 years.
    8. Setting up insurance loss adjusting companies is not allowed.
    9. Except otherwise approved by the China Insurance Regulatory Commission, foreign insurance companies are not allowed to be involved in the following activities with their related enterprises:
      1. Inward or outward reinsurance businesses; and
      2. Purchase or sale of assets or other transactions.
      Those foreign insurance companies having the approval to carry on inward or outward reinsurance businesses with their related enterprises shall submit the materials as required by the China Insurance Regulatory Commission.

    Regarding the mode of “cross-border services”:

    1. To encourage Guangdong insurance companies to cede their business to Hong Kong insurance or reinsurance companies with RMB as the settlement currency.
    2. To encourage Hong Kong insurance companies to continue expanding the scale of their outward reinsurance business placements to the Mainland (including Guangdong Province) reinsurance companies.
    3. To allow Guangdong insurance companies that fulfil regulatory requirements to appoint Hong Kong insurance companies to provide RMB insurance policies selling services in Hong Kong. These insurance companies must strictly follow the requirements of relevant insurance laws, regulations and codes, and their businesses being carried on in a regulated manner with a view to enhancing mutual development of insurance markets.

For the purposes of the CEPA, the main qualifying criteria for HKSS who provides services in the form of juridical person are:

  1. The service supplier should be incorporated or established pursuant to the Companies Ordinance (Cap.622) and be authorized under the Insurance Companies Ordinance (Cap.41) to carry on insurance business in Hong Kong.
  2. The service supplier should engage in substantive business operations in Hong Kong. In other words
    1. the nature and scope of the services provided in Hong Kong by a Hong Kong service supplier should meet the requirements in Annexes 4 and 5 to the CEPA Main Text, and any restrictive requirements applicable to the nature and scope of the business of foreign investment entities in the laws, regulations and administrative regulations of the Mainland shall apply;
    2. it should have engaged in substantive business operations for 5 years or more;
    3. during the period of substantive business operations in Hong Kong, it should have paid profits tax in accordance with the law;
    4. it should own or rent premises in Hong Kong to engage in substantive business operations; and
    5. among the staff employed by it in Hong Kong, more than 50% should be residents staying in Hong Kong without limit of stay, and people from the Mainland staying in Hong Kong on One Way Permit.

Application for Certificate of HKSS

Application for a Certificate of HKSS should be made to the Trade and Industry Department ("TID") of the HKSAR. The TID has promulgated the Notice to Service Suppliers which sets out the detailed application procedures for Certificate of HKSS. Please visit the website: http://www.tid.gov.hk/english/cepa/ for the latest relevant Notice or further details on CEPA.

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Q13 What are the application procedures/requirements for providing services in the Guangdong Province under CEPA?
A13

Information about the application procedures/requirements for providing services in the Guangdong Province under CEPA is available at the website: http://www.tid.gov.hk/english/cepa/businessinfo/cepa_guangdong.html . Please visit the website for the relevant details.

 
 
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