Employees Compensation Insurer Insolvency Scheme

The Employees Compensation Insurer Insolvency Scheme ("ECIIS") came into operation on 1 April 2004 to take over the function of the Employees Compensation Assistance Scheme ("ECAS") in providing employees compensation ("EC") in the event of insolvency of an employer's insurer which happens on or after that date. This arises from the revamp of the ECAS as contained in the Employees Compensation Assistance (Amendment) Ordinance 2002, which provided that insurer insolvency was to be excluded from the scope of ECAS coverage.

The ECIIS is operating on the basis of an agreement entered into on 21 February 2003 between the Government and the Employees Compensation Insurer Insolvency Bureau ("ECIIB") which is established by the insurance industry for operating the new scheme. The ECIIB is a non-profit company limited by guarantee. All insurers carrying on direct EC business must be ECIIB members. The ECIIS is funded by a contribution from member insurers at a rate of 2% of their gross EC premiums. To allow time for the insolvency fund to grow before the assumption of the ECAS responsibility, contribution to the scheme has started since 1 April 2003. If the ECIIS does not have sufficient assets to settle all valid claims, claimants have a right to queue up for compensation out of the subsequent contributions. The financial position of the ECIIS is subject to independent annual audit and its audited accounts are available for public inspection.

Following the commencement of ECIIS, ECAS only covers EC insurer insolvencies which occurred before 1 April 2004 while it continues to meet EC claims in respect of uninsured or untraceable employers.