With effect from 23 September 2019, the Hong Kong Insurance Authority (the IA), an independent statutory body, will take over regulation of insurance intermediaries from the three existing self-regulatory organisations (the Hong Kong Confederation of Insurance Brokers, the Professional Insurance Brokers Association, and Insurance Agents Registration Board) and administer a new statutory licensing regime. The new statutory licensing regime will capture a broader scope of regulated activities than under the existing regime.

Those currently licensed under the existing regime will benefit from the following transitional arrangements come 23 September 2019:

  • all insurance intermediaries who are validly registered with a self-regulatory organisation immediately before 23 September 2019, will be deemed to be licensees for a period of three years; and
  • all unresolved complaints and cases of non-compliance as at 23 September 2019 will be addressed by the IA but in accordance with the rules that would have applied had the new regime not taken effect (i.e. the new regime does not have retrospective effect).

The commencement date for the final phase of changes under the Insurance Companies (Amendment) Ordinance 2015 was announced in the Insurance Companies (Amendment) Ordinance 2015 (Commencement) Notice 2019 which was gazetted on 17 May 2019. On the same date the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules and the Insurance (Maximum Number of Authorized Insurers) Rules were also gazetted, both of which will take effect from 23 September 2019.

The Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules prescribe the financial and other requirements for licensed insurance broker companies in relation to (a) capital and net assets; (b) professional indemnity insurance; (c) keeping of separate client accounts; (d) keeping of proper books and accounts; and (e) submission of audit and related information. The Rules modify the relevant requirements in the Guideline on Minimum Requirements for Insurance Brokers issued by the IA and the membership requirements issued by the existing self-regulatory organisations, including by increasing the minimum amount of the paid-up share capital and net assets of an insurance broker company from HK$100,000 to HK$500,000 (although there is a four year transitional period for existing insurance broker companies).

The Insurance (Maximum Number of Authorized Insurers) Rules prescribe the maximum number of authorized insurers by which a person may be appointed as a licensed insurance agency or licensed individual insurance agent at any time. Following consultation, the IA decided to not to adopt the proposal to raise the maximum number of insurers from four to five.

In September 2018, the IA released a consultation paper on two draft guidelines concerning the “fit and proper” criteria and continuing professional development for licensed insurance intermediaries.  The IA is yet to publish its consultation conclusions on the guidelines although we would expect these to be available shortly. The draft “fit and proper” guidelines propose more onerous ‘fit and proper’ criteria than exists under the current regime (including proposing higher education requirements and professional qualifications for responsible officers). In assessing the professional competency of insurance agencies and broker companies, the IA will have regard to whether the relevant entity has effective policies and procedures in place to ensure compliance with legal and regulatory requirements. The CPD guidelines also propose a higher number of CPD hours for individual licensees.

Further information is available on the IA website. If you wish to discuss, please do contact us.