LATEST DEVELOPMENTS IN INSURANCE LAW

December 2019

The Insurance Authority officially took over the three self-regulatory organizations on 23 September 2019, namely the Insurance Agents Registration Board established under the Hong Kong Federation of Insurers, the Hong Kong Confederation of Insurance Brokers and the Professional Insurance Brokers Association, to become the sole regulator to license and to supervise all insurance intermediaries’ compliance with the Insurance Ordinance (Cap 41 of the Laws of Hong Kong) and the relevant regulations, rules, codes and guidelines.

In respect of licensing, all existing insurance intermediaries, responsible officers of insurance agencies and chief executives of insurance brokers who were previously registered with the three self-regulatory organizations are deemed to be registered under the new regime for a three-year transitional period. Arrangements will be made for insurance intermediaries who are deemed licensees to apply for formal licences to be granted by the Insurance Authority during the transitional period, with more details to be made available at a later stage.

On the regulatory and compliance front, the Insurance Authority has published the Code of Conduct for Licensed Insurance Agents and the Code of Conduct for Licensed Insurance Brokers which set out, among others, the minimum professional standards to be met by insurance intermediaries commencing from 1 January 2020.

In addition to the Codes, other new rules and guidelines applicable to insurance intermediaries also came into force on 23 September 2019, including the following:

1. Rules and guidelines applicable to licensed insurance agents:

• Insurance (Maximum Number of Authorized Insurers) Rules (Cap 41K of the Laws of Hong Kong)
  

2. Rules and guidelines applicable to licensed insurance brokers:

• Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap 41L of the Laws of Hong Kong)
  

3. Rules and guidelines applicable to both agents and brokers:

• Guideline on Anti-Money Laundering and Counter-Terrorist Financing (GL3)
  
• Guideline on Exercising Power to Impose Pecuniary Penalty in respect of Anti-Money Laundering and Counter-Terrorist Financing (GL3A)
  
• Guideline on the Use of Internet for Insurance Activities (GL8)
  
• Guideline on Exercising Power to Impose Pecuniary Penalty in respect of Regulated Persons under the Insurance Ordinance (GL22)
• Guideline on “Fit and Proper” Criteria for Licensed Insurance Intermediaries under the Insurance Ordinance with List of Acceptable Insurance Qualifications (GL23)
  
• Guideline on Continuing Professional Development for Licensed Insurance Intermediaries with Requirements applicable to E-learning Activities (GL24)
  
• Guideline on Offering of Gifts (GL25)
  
• Guideline on Sale of Investment-Linked Assurance Scheme Products (GL26)
  

Insurance intermediaries are expected to put in place sufficient control and policies to ensure compliance with all relevant requirements.

With the view to modernizing Hong Kong’s insurance industry by making room for innovation and technology, the Insurance Authority granted the first authorization of virtual life insurer in December 2018 and the first virtual general insurer in October 2019 through the Fast Track scheme. They carry on insurance business in or from Hong Kong solely through digital distribution channels, without the use of any agents, banks or brokers.

This year marks a significant milestone for the insurance industry with the role that the Insurance Authority is assuming and the recent developments in insurtech in Hong Kong. Insurance intermediaries and authorized insurers are reminded to take appropriate steps to meet the latest requirements under the new regulatory regime.