HKIA rules face 2024 overhaul, await legislative approval
There are four draft rules covered in the second round of consultation.
The Insurance Authority (IA) of Hong Kong, released additional draft Rules related to the new regime, namely: Draft Insurance (Exemption to Appointment of Actuary) Rules, Draft Insurance (Maintenance of Assets in Hong Kong) Rules, Draft Insurance (Marine Insurers and Captive Insurers) Rules, and Draft Insurance (Lloyd’s) Rules.
Looking back, on 5 December 2023, initiated a public consultation on two draft rules: Insurance (Valuation and Capital) Rules and Insurance (Submission of Statements, Reports and Information) Rules. These rules address the quantitative assessment and reporting requirements under the three-pillar framework.
The Draft Insurance (Exemption to Appointment of Actuary) Rules propose exemptions for certain insurers, such as marine insurers, captive insurers, and certain small-sized insurers, from appointing actuaries for general business, considering unique features and compliance costs.
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Revised Section 25A of the IO mandates the maintenance of assets in Hong Kong for authorised insurers engaged in general business in or from Hong Kong.
The Draft Insurance (Maintenance of Assets in Hong Kong) Rules seek exemptions for specific insurers and determine the required amount of assets to be maintained in Hong Kong. Relief is provided for onshore reinsurance business based on insurers' financial strength ratings.
The Draft Insurance (Marine Insurers and Captive Insurers) Rules aim to simplify the capital regime for these insurers, considering their unique characteristics in terms of capital and policyholders.
Regarding Lloyd’s, the Draft Insurance (Lloyd’s) Rules aim to establish a simplified capital regime, acknowledging the marketplace nature of Lloyd’s. The rules allow the use of letters of credit to meet capital requirements, covering valuation basis and other relevant areas.
These four draft Rules are open for consultation, and feedback can be provided. After considering feedback, the rules will be refined, finalised, published in the Gazette, and submitted to the Legislative Council for negative vetting.
The Amendment Ordinance, along with related subsidiary legislation, is expected to come into full operation after the Legislative Council's approval in 2024, as appointed by the Secretary for Financial Services and the Treasury.