| Regulatory Framework > Insurance
Companies Ordinance |
|
The Insurance
Companies (Amendment) Ordinance 1999 ("Amendment Ordinance")
[PDF] has been enacted and was gazetted on 23 July 1999. It
came into operation immediately.
The Amendment Ordinance amends the Insurance
Companies Ordinance (Cap.41) ("ICO") to:
- introduce a new regulatory framework for Lloyd's;
- accelerate the submission of financial information by
insurers relating to their Hong Kong general business from
6 to 4 months; and
- extend the number of development years for the submission
of claims statistics by insurers relating to their Hong
Kong general business from 8 years to 12 years.
Lloyd's is an association of underwriters
established in the 17th century. It is not a conventional
insurance company but rather a market place for its members
to conduct insurance business as sole traders in the form
of syndicates. Due to its historical background and unique
mode of operation, Lloyd's is subject to regulatory requirements
different from an ordinary insurer in Hong Kong. Having regard
to the recent major reorganization of Lloyd's and the extent
of its business operation in Hong Kong, the Amendment Ordinance
introduces a new regulatory framework for Lloyd's. The new
regulatory framework aims at enhancing the protection to policy
holders and providing a level playing field for all insurance
operators.
Under the new regulatory framework, Lloyd's
is subject to similar regulatory requirements applicable to
other authorized insurers, i.e. requirements on solvency margin,
local assets, fit and proper management, financial reporting
and regulation of its insurance agents. Lloyd's is also subject
to the interventionary powers of the Insurance Authority ("IA").
Transitional arrangements are provided in
the Amendment Ordinance for Lloyd's to prepare for compliance
with the requirements on local assets, financial reporting
and regulation of insurance agents. Other requirements take
immediate effect upon the operation of the Amendment Ordinance.
Under the ICO, an insurer is required to
submit, among other things, financial information relating
to its Hong Kong general business in specified formats (i.e.
the Hong Kong General Business Return and the Statement of
Assets and Liabilities) within 6 months from its financial
year end. This is considered unduly long and has prevented
the IA from undertaking appraisals and taking remedial actions
in a timely manner to protect the interests of the Hong Kong
policy holders. The delay in the submission of financial information
also causes delay in the issue of industry statistics, and
therefore affects the transparency of the market.
Therefore, the Amendment Ordinance shortens
the time limit for the submission of financial information
relating to the Hong Kong general business from 6 to 4 months.
Transitional arrangements are provided in
the Amendment Ordinance. The new requirement will takes effect
upon an insurer for submission of the above information relating
to the financial year which ends on or after the first anniversary
date of the commencement of the Amendment Ordinance (i.e.
23 July 2000).
Under the ICO, an insurer is required to
submit to the IA claims statistics in respect of all classes
of general business for 8 development years in the Hong Kong
General Business Return. The purpose is to provide the IA
with statistical data for assessing the amount of outstanding
claims liabilities of an insurer, and hence the adequacy of
its provisions.
Experience has shown that a claims development
history of 8 years is inadequate to provide a reliable basis
for the above purpose, particularly for business the liability
of which would take a much longer period to fully run off.
Therefore, the Amendment Ordinance extends the length of the
development years from 8 years to 12 years.
Transitional arrangements are provided in
the Amendment Ordinance which allows an insurer to comply
with the new requirement on a gradual basis up to 4 years.
An insurer is required to provide claims statistics for one
additional year in the new Forms each year after commencement
of the Amendment Ordinance for 4 years, by the end of which,
the insurer will be required to provide the claims statistics
for all 12 years specified in the new Forms.
Some of the above materials are presented
in PDF format. Please download Adobe
Reader for viewing. Install the Asian
Font Pack if necessary.
|
