Insurance Authority welcomes the introduction of the amendment bills to strengthen Hong Kong’s position as a global risk management centre and regional insurance hub
20 March 2020
The Insurance Authority (IA) welcomes the gazettal of the Insurance (Amendment) Bill 2020 and the Insurance (Amendment) (No.2) Bill 2020 today (20 March 2020).
The Insurance (Amendment) Bill 2020 provides for a bespoke, streamlined regulatory framework for the issuance of insurance-linked securities (ILS) through the formation of special purpose insurers (SPIs). ILS are alternative risk-management tools for transferring insurance risk to the capital markets, thus increasing the capacity of the insurance market and providing institutional investors with additional options for diversification.
“The Central Government has announced support for Mainland insurers to issue catastrophe bonds in Hong Kong1,” said Dr Moses Cheng, Chairman of the IA. “The proposed legislative amendments will pave way for Hong Kong to become the preferred domicile for ILS, in particular catastrophe bonds. This will facilitate insurers to better capture business opportunities, and more importantly, extend the capacity of the insurance industry; thus enhancing its sustainable development.”
The bill also seeks to expand the scope of insurable risks of captive insurers set up in Hong Kong, helping the industry capitalise on business opportunities arising from the Belt and Road Initiative.
The aim of Insurance (Amendment) (No.2) Bill 2020 is to consolidate a clear and firm legal basis for the IA to exercise direct regulatory powers over the holding companies of multinational insurance groups2. Building on Hong Kong’s extensive experience in the supervision of insurance groups, the legislative framework would clearly set out the basis upon which the IA would perform effective and efficient group-wide supervision and ensure that the insurance regulatory system in Hong Kong will continue to be conducive to the maintenance of strong, well-capitalised, well-managed insurance groups.
“Using a principle-based, outcome-focused approach, the new framework will put Hong Kong on a par with international standards and practices, thus strengthening its competitiveness in the global insurance market and reinforcing its position as a regional insurance hub,” Dr Cheng said.
The IA will maintain close dialogue with industry stakeholders on the details of the bills and render full support to the Legislative Council in the scrutiny process.
Ends
Notes:
1After the meeting of the Leading Group for the Development of the Guangdong-Hong Kong-Macao Greater Bay Area held in November 2019, the Central Government announced a series of policy measures, including supporting Mainland insurers to issue catastrophe bonds in Hong Kong to facilitate bond market development in Hong Kong.
2The IA is currently the group-wide supervisor for three multinational insurance groups: AIA Group, FWD Group and the Prudential plc Group.