With less than a week before the Insurance Authority (IA) takes over the regulation of insurance intermediaries on 23 September 2019 (please refer to our earlier blog post), we round up the following recent related announcements:
- On 30 August 2019, the IA issued a circular reminding each authorized insurer that upon the commencement of the new regulatory regime for insurance intermediaries, it must obtain the IA’s consent before appointing an individual as a key person in control function for its intermediary management function. The IA will not approve such appointment unless it is satisfied that the individual is a fit and proper person to be appointed. Transitional arrangements have been made to provide authorized insurers additional time to fulfil the requisite formalities – please refer to the circular for further details.
- On 3 September 2019, the IA released conclusions on its consultations on the draft Code of Conduct for Licensed Insurance Agents and the draft Code of Conduct for Licensed Insurance Brokers (together, the Codes). The Codes have been refined to incorporate feedback from the industry but are not significantly different from the original proposals. Whilst the Codes will take effect on 23 September 2019, the IA has indicated that in the first few months it will adopt a flexible approach in considering insurance intermediaries’ compliance with the Codes. Licensees however are expected to fully comply with the Codes from 1 January 2020 onwards.
- On 11 September 2019, the Hong Kong Monetary Authority (HKMA) issued a circular on its expectations concerning the sufficiency of authority of responsible officers (ROs) of insurance intermediaries which are authorized institutions (AI). The HKMA notes that:
- An individual who is or proposed to be an RO of a licensed insurance intermediary which is an AI (or an AI applying to become a licensed insurance intermediary) under the Insurance Ordinance (IO) should have sufficient authority from the AI for discharging his/ her responsibilities as an RO. In particular,
- If any of the individuals responsible for directly supervising the conduct of insurance regulated activities of an AI is the AI’s chief executive, alternate chief executive or director as defined in the Banking Ordinance (BO), it is expected that such individual will be appointed as an RO of the AI;
- If (i) above is not applicable, the appointment of an RO of the AI should be based on seniority in accordance with the AI’s internal organisational and management structure. In other words, the RO should be an individual of the highest rank responsible for directly supervising the AI’s insurance regulated activities; and
- An AI should ensure that at least one RO is the chief executive, an alternate chief executive, a director or a manager (as defined under the BO) of the AI, and any remaining ROs of the AI should not be more than one rank below the chief executive, an alternate chief executive, a director or a manager of the AI if they do not themselves fall into these categories.
- An AI should appoint a sufficient number of ROs in order to ensure that the conduct of insurance regulated activities is adequately supervised. Factors which should be taken into account include the scale of business, the nature of insurance services and products, the number of licensed technical representatives and the organisational and management structure of the AI.
- On 13 September 2019, the IA released 6 sets of guidelines (GL25 – GL30) applicable to the sale of long-term insurance policies. These guidelines are effectively a consolidation (with some further refinements by the IA) of the codes and guidance governing the sale of long term insurance policies issued by the Hong Kong Federation of Insurers. These guidelines will take effect on 23 September 2019.
 Under the new licensing regime for insurance intermediaries commencing on 23 September 2019, a licensed insurance agency or a licensed insurance broker company should have ROs approved by the IA to supervise the conduct of regulated activities under the Insurance Ordinance and to ensure that proper controls and procedures are in place for the purpose of compliance with all statutory and regulatory requirements relevant to such activities carried on by the licensed insurance intermediary.
 The HKMA notes that flexibility in assessing an RO’s sufficiency of authority would only be allowed on an exceptional basis with justifications taking into account factors such as the size of the AI, the significance of insurance regulated activities in relation to the overall business of the AI, the AI’s organisational and management structure and the reporting line of the RO.
A copy of the circular can be accessed at https://www.ia.org.hk/en/legislative_framework/circulars/reg_matters/files/Circular_to_insurers_re_6_sets_of_guidelines.pdf