6 April 2023
The Insurance Authority (IA) welcomes the gazettal of the Insurance (Amendment) Bill 2023 (the Bill) today (6 April 2023), which provides the legislative framework for the implementation of the Risk-based Capital (RBC) regime for the Hong Kong insurance industry.
The RBC regime requires insurers to maintain capital that is commensurate with the risks they bear. In formulating the new regime, the IA has observed three overarching principles: compliance with relevant Insurance Core Principles issued by the International Association of Insurance Supervisors; meeting needs and ensuring competitiveness of insurance industry; and strengthening resilience of insurance industry for protection of policy holders.
“The RBC regime seeks to strengthen the financial soundness of insurers and put Hong Kong on a par with international standards, consolidating Hong Kong’s function as an international risk management centre,” an IA spokesperson said. “Adopting the RBC regime will also incentivise insurers to enhance their risk management culture, thereby instiling market stability.”
The RBC regime comprises three pillars: Pillar 1 on quantitative assessment, Pillar 2 on corporate governance and risk management and Pillar 3 on disclosure requirements. The Bill will provide the legal basis for implementing Pillar 1 and Pillar 3 requirements 1 , remove or update certain obsolete provisions, and empower the IA to prescribe the detailed requirements by way of subsidiary legislation.
The IA will maintain close communication with the industry on the details of the Bill and render full support to the Legislative Council in the scrutiny process.
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Note:
1 The Pillar 2 requirements have been implemented with the issuance of the Guideline on Enterprise Risk Management (GL21), which took effect on 1 January 2020.