Hong Kong Regulatory Insurance Update - January 2024

30 November 2023

Mr. Tony Chan, Associate Director, Policy and Development of the IA, addressed the challenges of the insurance industry in his opening speech at the Actuarial Society of Hong Kong’s 21^st Appointed Actuaries Symposium on 30 November 2023.

Mr. Chan warned insurers of liquidity risks due to the rising interest rates since 2022 and reminded them to review and refine their liquidity metrics, including liquidity measures and various liquidity stress testing scenarios reported in their own risk solvency assessment (ORSA).

In respect of environmental, social and governance (ESG) disclosure requirements, Mr. Chan confirmed that the IA is targeting the implementation of climate-related disclosures that will align with the International Sustainability Standards Board standards.

On the development of the risk-based capital (RBC) regime in Hong Kong, the IA expects to launch a public consultation on the following two most important draft rules:

• Insurance (Valuation and Capital) Rules (Cap. 41R), which cover RBC Pillar 1 requirements on calculation of capital adequacy; and
• Insurance (Submission of Statements, Reports and Information) Rules (Cap. 41S), which cover RBC reporting requirements on filing financial statements, regulatory reporting and the actuary’s report.

Mr. Chan also referred to the IA’s proposed new requirements for participating business in addition to those set in the Insurance (Amendment) Ordinance 2023 to further enhance the management of that type of business. The initial regulatory guidance proposed by the IA requirements will cover participating fund set up and surplus transfers, attribution or allocation of expenses and charges, physical segregation, independent review at initial implementation of participating fund requirements and related governance and disclosures.   The aim is to promote adherence to the key principles of sustainability, fairness between policyholders and shareholders and meeting policyholders’ reasonable expectations in managing participating business. 

Keynote Speech of Mr. Tony Chan, Associate Director, Policy and Development of the Insurance Authority

4 December 2023

On 4 December 2023, the Insurance Authority (the IA) released claims statistics in relation to Typhoon Saola and a black rainstorm, both of which occurred in early September 2023.

These statistics showed that the total gross claims incurred from these two extreme weather events reached HK$1.9 billion.

Property damage and motor businesses were the two lines of business which were most affected; representing 86% and 9% of the total gross claims respectively.

Property Damage and Business Interruption
No. of Claims Received	Property Damage	Business Interruption	Total Gross Claims Incurred (HK$’000)
	Gross Claims Incurred (HK$’000)
6,722	1,638,107	1,821	1,639,928

 

Employees’ Compensation (EC), Motor and Travel
No. of Claims Received	EC	Motor	Travel	Total Gross Claims Incurred (HK$’000)
	Gross Claims Incurred (HK$’000)
8,196	11,228	176,035	25,662	212,925

Mr. MM Lee, Acting Head of General Business of the IA, highlighted the increasing threat of climate change and emphasized the important role that insurance plays as a safety net in providing urgent relief and mitigating losses for businesses and individuals in face of climate hazards.

Ms. Sally Wan, Chairman of General Insurance Council of the Hong Kong Federation of Insurers, also stressed the importance of having sufficient insurance coverage for both individuals and communities.

IA press release
Business Insurance article
Insurance Business Magazine article 
Insurance Asia article

5 December 2023

After the Insurance (Amendment) Bill 2023 was passed in July 2023, the IA launched a public consultation on:

• the draft Insurance (Valuation and Capital) Rules (Cap. 41R), which outline specific capital adequacy requirements and prescribe the valuation of assets and liabilities of insurers under the Risk-based Capital (RBC) regime in Hong Kong; and
• the draft Insurance (Submission of Statements, Reports and Information) Rules (Cap. 41S), which stipulate the types of returns, as well as frequency and manner of submission to the IA.

The public consultation period ended on 16 January 2024.

The RBC regime aims to not only enhance the financial stability of insurers and align Hong Kong with international standards, but also encourage better asset-liability matching and foster a robust risk management culture of insurers.

IA press release
The Consultation Paper
Insurance Business Magazine article
Insurance Asia article

28 December 2023

The Financial Services and the Treasury Bureau (FSTB) published the consultation conclusions on the proposal to establish a policy holders' protection scheme (PPS).

Having collected views on the proposed PPS from insurers, professional bodies (insurance, actuarial, legal and consumer protection), members of the public, the FSTB then met with the Panel on Financial Affairs of the Legislative Council. The FSTB noted the respondents generally support the establishment of a PPS and its proposed key features. The FSTB will fine-tune the proposal to address stakeholders' concerns having regard to the comments and suggestions received.

The Government will begin preparatory work on establishing a PPS, including the formulation of detailed arrangements of the PPS and the drafting of the necessary legislative amendments, with a view to enhancing protection for policy holders in the event of insurer insolvency.

Government press release
FSTB’s consultation paper and consultation conclusions

16 December 2023

The Consumer Council surveyed the websites of four licensed virtual insurance companies on their chatbot services, application form interfaces, personal data requested, and the privacy policy, etc. and urged for improvement in these areas.

The survey revealed that some virtual insurance companies had generally less user-friendly website interfaces, and responses provided by chatbots were often irrelevant or similar to information found through website searches. For example, only one company clearly specified the retention period for consumers' personal data, while the remaining three lacked transparency in disclosing such information. The companies also varied in their identity verification methods and in questions about non-prescribed drug use and hazardous activities in applications for Voluntary Health Insurance Scheme Plans.

The Customer Council recommended improvements to enhance website functionality and improve privacy policy disclosures to bolster consumer confidence in virtual insurance products.

Consumer Council’s press release
Insurance Business Magazine article
Insurance Asia article