The Office of the Commissioner of Insurance (OCI) recently released its 2015 Annual Report, highlighting the considerable challenges and changes ahead for the insurance industry and the OCI.

Essential preparation is underway for the OCI to be succeeded by Hong Kong’s new insurance regulator, the Independent Insurance Authority (IIA), which is expected to start operation in late 2016, but not all insurance regulatory functions will be transferred to the IIA until 2018.

In the past year, the OCI has: (i) issued consultation conclusions on a new risk-based capital framework, which seeks to make capital requirements on insurers more sensitive to their level of operational risk; (ii) maintained close cooperation with international insurance regulators and hosted the 14th joint meeting of the insurance regulators of Guangdong, Hong Kong, Macao and Shenzhen; (iii) issued a guidance note on Underwriting Long Term Insurance Business (other than Class C Business) in July 2015, which sets out comprehensive requirements for insurers in relation to, among other things, product design and provision of adequate and clear information, to ensure fair treatment of customers (Guidance Note 16); and (iv) formed a Fintech Liaison Team for the purpose of updating regulatory and compliance requirements to keep up with developments in technology and to facilitate innovation among insurers.

Looking forward, apart from the transfer of the regulatory functions to the IIA, the OCI, among other things, is (i) proceeding to the next phase of developing detailed rules and conducting quantitative impact studies for different types of insurers in relation to the new risk-based capital framework; (ii) overseeing the implementation of Guidance Note 16; and (iii) working on the enabling legislation proposed to be introduced into the Legislative Council in 2017 for establishing the proposed Policyholders’ Protection Fund, which aims to protect policyholders’ interests in the event of insolvency of an insurer.