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Legislative and Regulatory Framework > An Overview of the Regulatory Framework > An Overview of the Regulatory Framework

An Overview of the Regulatory Framework

The Insurance Ordinance (along with its subsidiary legislation) (Cap. 41) is the principal legislation to regulate the insurance industry in Hong Kong. The regulatory framework applicable to insurers, designated insurance holding companies and insurance intermediaries in Hong Kong is set out in the Insurance Ordinance. The Insurance Ordinance sets out the requirements for the authorization / designation / licensing, ongoing compliance and reporting obligations of insurers, designated insurance holding companies and insurance intermediaries.

Insurance Authority

The Insurance Authority (“IA”) is a statutory body set up to administer the Insurance Ordinance. In accordance with section 4A(1) of the Insurance Ordinance, the principal functions of the IA are to regulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and for the protection of existing and potential policy holders. Without limiting the generality of section 4A(1), the IA has other specific statutory functions.

Industry Advisory Committees

Two Industry Advisory Committees (“IACs”), one for long term business and the other for general business, are established under section 4C of the Insurance Ordinance to advise the IA on industry-related issues and policies. The constitution and proceedings of the IACs are provided in Schedule 1C of the Insurance Ordinance. Members of an IAC include the Chairperson and Chief Executive Officer of the IA, not more than two other executive directors of the IA, and eight to 12 other members appointed by the Financial Secretary after consultation with the IA who are persons with knowledge of or experience in the insurance industry, the conduct of regulated activities and consumer affairs.

List of non-official members of the two IACs can be found at: Industry Advisory Committees

Section 4D of the Insurance Ordinance empowers the IA to establish additional committees on any matters regarding the performance of its functions.

Regulations

Under section 128 of the Insurance Ordinance, the Chief Executive in Council may make regulations to provide for the payment to the IA of, and prescribe fees for an application to the IA under the Insurance Ordinance, anything done by the IA or an IAC, or any other matter with regard to which provision is made by or under the Insurance Ordinance. The Chief Executive in Council may also make regulations to provide for the payment of charges or penalties for late payment of any fees.

Regulations made pursuant to section 128 of the Insurance Ordinance are subsidiary legislation.

Rules

Section 129 of the Insurance Ordinance empowers the IA to make rules to set out detailed regulatory requirements in response to changing market landscape and regulatory needs. The rules may provide for specified matters (e.g. applications for licence, the issue of licences, requirements of returns to be made by authorized insurers, designated insurance holding companies and licensed insurance intermediaries to the IA at specified times, the qualifications, examination and training requirements for licensed insurance intermediaries, the maintenance of registers by the IA), and other matters, after consulting the Financial Secretary, that are necessary for the performance of any of its functions.
 
Rules made pursuant to section 129 of the Insurance Ordinance are subsidiary legislation.
 

Codes and Guidelines

Section 133 of the Insurance Ordinance empowers the IA to publish non-statutory codes and guidelines for matters in relation to any of the functions of the IA or the operation of a provision of the Insurance Ordinance. The purpose of codes and guidelines is to provide the industry with practical guidance to facilitate compliance with the regulatory requirements.

While the codes and guidelines are not statutory requirements and failure to comply with them does not by itself render a person liable to any judicial or other proceedings, the codes or guidelines are admissible in evidence in any proceedings under the Insurance Ordinance before a court. The IA will also have regard to the codes and guidelines when excising its powers, including taking disciplinary actions where applicable.

Orders and Regulations for Levies

With effect from 1 January 2018, if a contract of insurance relates to a prescribed class of insurance business or a type of contract of insurance, a prescribed levy is payable to the IA for the contract by its policy holder.

Under section 134 of the Insurance Ordinance, the Chief Executive in Council may by order specify any rate or amount as a prescribed levy. In addition, the Chief Executive in Council may make regulations for payment of levies, the payment of charges or penalties for late payment of levies and the keeping, examination and audit of the accounts of authorized insurers and licensed insurance intermediaries in relation to collection and payment of levies.