Insurance and reinsurance in Hong Kong: overview

A Q&A guide to insurance and reinsurance law in Hong Kong.

The Q&A gives a high level overview of the market trends and regulatory framework in the insurance and reinsurance market; the definitions for a contract of insurance and a contract of reinsurance; the regulation of insurance and reinsurance contracts; the forms of corporate organisation an insurer can take; and the regulation of insurers and reinsurers, including regulation of the transfer of risk. It also covers: operating restrictions for insurance and reinsurance entities; reinsurance monitoring and disclosure requirements; content requirements for policies and implied terms; insurance and reinsurance claims; remedies; insolvency of insurance and reinsurance providers; taxation; dispute resolution; and proposals for reform. Finally, it provides websites and brief details for the main insurance/reinsurance trade organisations in Hong Kong.

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This Q&A is part of the global guide to insurance and reinsurance. For a full list of jurisdictional Q&As visit


Market trends and regulatory framework

1. What were the main trends in the insurance and reinsurance markets over the last 12 months?

The information below is taken from the website of the Office of the Commissioner of Insurance (OCI) of the Hong Kong Government (see box, Online resources). Unless otherwise stated, statistics are as at 31 December 2014.

Market data

Traditionally low entry barriers mean the insurance market is well serviced and competitive. As at 31 December 2014, there were 158 authorised insurers comprising:

  • 95 general business insurers.

  • 44 long-term business (life) insurers.

  • 19 composite insurers (both general and long-term).

Most international insurers have operations in Hong Kong. In December 2014, it was recorded that over 50% of insurers were incorporated in Hong Kong, often as a local subsidiary of a large international insurer, with the balance coming from 22 different countries, but predominantly from the US (11), Bermuda (12) and the UK (12).

As at 31 December 2014, Hong Kong had:

  • 657 registered insurance brokers.

  • 46,079 registered insurance agents.

The major lines of business in 2014, using total gross premiums as the benchmark, were:

  • General business:

    • accident and health (26.3%);

    • property damage (20.4%);

    • general liability (25.02%); and

    • motor vehicle (11.26%).

  • Long-term business (new business):

    • individual life and annuity (linked and non-linked) business (99.45%); and

    • other individual, and non-retirement scheme group business (0.55%).

Premium income

The insurance industry makes a major contribution to the Hong Kong economy. Gross annual premium income increased significantly during the 1990s and continued to do so until 2008 (before the economic crisis). Gross premium income has recently begun to rise again, and rose by 13.4% in 2014 to total HK$329.7 billion.

Long-term business is the largest sector of the insurance market. Gross premiums for long-term business in 2014 totalled HK$285.8 billion (86.68% of the market total). Individual life insurance is the largest part of this business. At the end of 2014, about 10.9 million individual life and annuity policies were in force which is equivalent to more than one life policy per resident of a current population of about 7.26 million.

General business (gross) grew by 4.2% during 2014 (with gross premiums totalling over HK$43.9 billion). Underwriting profit for general business in 2014 increased from HK$2.2 billion in 2013 to HK$2.3 billion in 2014.

In 2013, insurance penetration (measured as premiums as a percentage of GDP) stood at 12.1% for long-term business, but only 2% for general business. Figures are yet to be reported for 2014.

Major trends

The major insurance market trends over the past few years include:

  • The growth of wealth management and investment- linked products. From 1990 onwards, an ageing population and increased prosperity led to a large increase in the sale of wealth management and retirement planning products, predominantly investment-linked insurance policies. By the end of 2007, investment-linked products accounted for more than half of life business by gross premium. Investment-linked business declined during 2008 with premiums falling to 42% of life business. For 2009 to 2011, the figure remained at about 33% but in 2012 it fell again to just above 30%. In 2014, the figure dropped to just below 14.1%.

  • Creation of the Mandatory Provident Fund scheme (MPF). This compulsory retirement savings scheme was introduced at the end of 2000. Under the MPF, employers and employees must contribute a percentage of their monthly salary (with the maximum mandatory monthly contribution being HK$1,500) to a privately operated retirement scheme established and administered under the MFP Scheme Ordinance. By the end of 2014, there were 38,000 registered MPF schemes and 4,101,000 registered ORSO schemes.

  • Closer Economic Partnership Arrangement (CEPA). CEPA is the first free trade agreement between Hong Kong and mainland China. Since it came into effect in 2004, locally incorporated insurers in Hong Kong who meet the access conditions can conduct insurance business in mainland China through regrouping and strategic mergers, although the amount of capital participation by a Hong Kong insurance company in a mainland insurer is limited to 24.9%. CEPA also allows Hong Kong residents who have the necessary qualifications, and who are employed or appointed by mainland insurance institutions, to carry on insurance-related business in mainland China.

Since 2008, Hong Kong insurance agencies have been able to set up wholly owned enterprises in mainland China to provide insurance agency services to mainland insurance companies. From 2012, Hong Kong insurance brokerage companies have been permitted to set up wholly owned insurance agency companies in Guangdong Province (including Shenzhen) on a pilot basis.

On 18 December 2014, further measures facilitating cross-border trade and investment (specifically provisions for national treatment, most-favoured treatment, safeguard measures, exceptions and investment facilitation) were implemented with the signing of the Agreement between the mainland and Hong Kong on Achieving Basic Liberalisation of Trade in Services in Guangdong. All insurance and insurance-related services have been given national treatment, meaning that Hong Kong insurers in the mainland will be treated no differently to mainland insurers and vice versa (subject to certain exceptions in some areas). However, pre-existing restrictions remain in force, including:

  • Total assets of Hong Kong insurer must exceed US$5 billion.

  • Hong Kong insurer cannot hold more than 24.9% of a mainland insurer's shares.

  • Insurance loss adjusting companies cannot be set up.

2. What is the regulatory framework for insurance/reinsurance activities?

Hong Kong is a special administrative region (SAR) of the People's Republic of China.

Hong Kong has an entirely separate legal system from mainland China. Its constitutional framework is derived from the Basic Law under which Hong Kong exercises executive, legislative and independent judicial power. Under the "one country, two systems" principle, Hong Kong law has, since 1997, remained based on English common law supplemented by local legislation (largely based on UK legislation) and will do so until at least 2047.

Insurers and insurance intermediaries are regulated by various bodies and a mixture of statutes, government regulation and self-regulation.

Regulatory framework

The legal framework for the insurance industry is provided by the Insurance Companies Ordinance (ICO) and its subsidiary legislation, including the:

  • Insurance Companies (Determination of Long Term Liabilities) Regulation.

  • Insurance Companies (Margin of Solvency) Regulation.

  • Insurance Companies (General Business) (Valuation) Regulation.

The ICO is derived from the UK Insurance Companies Act 1974 (as amended in 1981 and then consolidated in the Insurance Companies Act 1982). The ICO recognises and regulates:

  • Insurers. An insurer carries on insurance business in or from Hong Kong (other than Lloyd's) (section 2(1), ICO). Insurance business is carried on if a person either (section 2(3), ICO):

    • maintains an office or agency in Hong Kong for that purpose; or

    • holds himself out as carrying on insurance business in or from Hong Kong.

  • Insurance agents. An insurance agent holds himself out to advise on or arrange insurance contracts in or from Hong Kong as an agent or sub-agent of one or more insurers. An appointed insurance agent is an insurance agent appointed by and registered with an insurer as an agent. Only an appointed insurance agent can act as an insurance agent.

  • Insurance brokers. An insurance broker carries on the business of negotiating or arranging contracts of insurance in or from Hong Kong as the policyholder's or potential policyholder's agent, or advising on insurance-related matters. An authorised insurance broker is an insurance broker who is either:

    • authorised by the Insurance Authority under section 69 of the ICO; or

    • a member of a body of insurance brokers approved by the Insurance Authority (see below, Regulatory bodies) under section 70 of the ICO.

  • The contract only requires some element of insurance for the person arranging it to require authorisation as a broker, and only an authorised insurance broker is permitted to hold itself out as an insurance broker.

The ICO uses the collective term "insurance intermediaries" for insurance agents and insurance brokers. A person cannot act as both an appointed insurance agent and an authorised insurance broker (section 65(3), ICO).

Regulatory bodies

Insurance Authority (IA). The main regulatory body is the IA, established under the ICO. The Commissioner of Insurance is responsible for supervising and regulating the insurance industry.

The IA authorises insurers, and monitors and scrutinises their financial strength and sustainability by reviewing their financial statements and business returns, ensuring compliance with the solvency standards and other ICO requirements, including requirements for:

  • General insurers to maintain assets in Hong Kong.

  • Long-term insurers to maintain the statutory solvency margin.

  • Insurers to submit annual audited financial statements and business returns, and for long-term insurers to submit actuarial reports.

  • Supervising insurance intermediaries.

The IA can issue guidelines on the exercise of its functions (section 4A( 3), ICO). These are for the guidance of authorised insurers, insurance intermediaries and their auditors and actuaries. To date, the IA has issued 15 guidance notes (referred to with the prefix GN) ( The guidance notes are not legally binding. However, they indicate how the IA interprets and enforces ICO requirements. Breach of the guidelines is likely to lead to increased IA regulatory scrutiny.

It is proposed that the IA will soon be replaced by the Independent Insurance Authority (IIA) (see Question 36).

Hong Kong Federation of Insurers (HKFI). The HKFI (see box, Main insurance/reinsurance trade organisations) represents the insurance industry. Most authorised insurers are members (at the end of April 2013, it had 86 general business members and 43 life insurance members). It plays an important role in the self-regulation of the industry through various codes of practice, guidance notes and other self-regulatory measures, including the:

  • Code of Conduct for Insurers (Insurers' Code).

  • Code of Practice for the Administration of Insurance Agents (Agency Code).

The Insurers' Code sets out the standards with which HKFI members must comply when issuing consumer insurance contracts (private insurance contracts with Hong Kong resident individuals). The Agency Code sets out the requirements for appointing, supervising and monitoring of insurance agents by their appointing insurer. However, this self-regulatory regime is proposed to be replaced with a statutory licensing regime for insurance intermediaries (both insurance agents and insurance brokers) overseen by the Independent Insurance Authority when it takes over regulatory oversight of the industry from the IA.


Regulation of insurance and reinsurance contracts

3. What is a contract of insurance for the purposes of the law and regulation? How does it differ from a contract of reinsurance?

There is no statutory definition of an insurance contract for the purposes of law or regulation in Hong Kong.

As Hong Kong law is based on English common law, the defining principles of an insurance contract can be derived from the case of Prudential Insurance Company v Commissioners of Inland Revenue [1904] 2 KB 658. An insurance contract under Hong Kong law is therefore a contract where one party (the insurer) agrees, in return for consideration (the premium), to indemnify or provide a benefit to the other party (the insured) if an uncertain and adverse event occurs.

As under English law:

  • The usual contract law principles apply (offer and acceptance, consideration and intention to create legal relations).

  • In general terms, the insured must have an insurable interest in the subject matter of the insurance policy at the time a claim is made for general insurance and at the time the policy is concluded for life insurance.

  • The insurance contract does not have to be in writing (except for marine insurance), although almost every insurance contract is in writing.

  • A contract for reinsurance is subject to the same governing principles as an ordinary contract for insurance. As the reinsurer is underwriting the risk written by another insurer, their contract will be with the insurer and not the insured. As with an insurance contract, a contract of reinsurance is simply a contract of indemnity.

4. Are all contracts of insurance/reinsurance regulated?

All insurance contracts are regulated. The insurance business classes relevant for the Insurance Companies Ordinance (ICO) purposes are set out in the Ordinance, including a narrative for each class describing the features of a contract falling within that class.

A contract within these classes and which is not otherwise an insurance contract (for example, because it is not an indemnity contract such as a life insurance policy) is deemed an insurance contract for ICO purposes (section 3(2), ICO). It is unlikely that any insurance contract would fall outside this comprehensive list.


Corporate structure

5. What form of corporate organisation can insurers take?

Most insurers incorporated in Hong Kong are public limited companies. Very few take the form of private companies, as under Hong Kong law private companies cannot have more than 50 members. There are a number of mutual insurance companies, particularly in the area of marine insurance. These entities are governed by the Marine Insurance Ordinance.


Regulation of insurers and reinsurers

6. Are all insurers and reinsurers regulated? Are they all regulated in the same way?

The Insurance Companies Ordinance (ICO) does not distinguish between an insurer and a reinsurer (they both fall within the ICO definition of "insurer") and so they are regulated almost identically, except that:

  • There is no requirement for a pure reinsurer to maintain assets in Hong Kong in compliance with section 25A of the ICO.

  • An insurer is authorised to carry on either general business or long-term business, but not both (it is no longer possible for an insurer to obtain a composite licence, that is, one licence permitting it to carry on both general business and long-term business), but a professional reinsurer can obtain a composite licence.

  • Professional reinsurance companies enjoy a preferential tax treatment (see Question 32).

Therefore, in this Q&A the term "insurer" includes a reinsurer, and references to "insurance" include reinsurance unless otherwise stated.

7. Can insurers and reinsurers carry on non-insurance business? Are there any restrictions on their business activities?

Insurers can carry on non-insurance business. However, the Insurance Authority (IA) does not authorise applicants to carry on insurance business in or from Hong Kong unless it is satisfied that the carrying on of some other form of business is not contrary to existing or potential policyholders' interests (section 8(3)(g), Insurance Companies Ordinance (ICO)). The authorisation conditions continue to apply to insurers after authorisation.

8. Are there any statutory limits or other restrictions on, or requirements relating to, the transfer of risk by insurance or reinsurance companies?

There is no statutory limit or restriction on the transfer of risk but the following matters are relevant.

To be authorised as an insurer, applicants (except captive insurers) must satisfy the Insurance Authority (IA) that they would not engage in a fronting operation (under which the ceding company (the primary or fronting company) cedes the risk it has underwritten to its reinsurer with the ceding company retaining none or a small part of that risk for its own account) (para 11(j), GN1: Authorisation Guidelines). These conditions continue to apply to an insurer after authorisation. What constitutes a small part of that risk is not specified, but it would generally be difficult to persuade the IA to accept risk retention of less than 10% of a particular class of business.

An insurer must either have adequate reinsurance arrangements for the risks of each class of business it insures, or justify to the IA why there are no arrangements for this purpose (section 8(3)(c), Insurance Companies Ordinance (ICO)). Further guidance on reinsurance arrangements with related companies is set out in Guidance Note 12, but the IA only accepts this kind of reinsurance if those related companies have a sufficiently high credit rating.


Operating restrictions

Authorisation or licensing

9. Does the entity or person have to be authorised or licensed?

Insurance/reinsurance providers

A company wishing to carry on insurance business in or from Hong Kong must apply to the Insurance Authority (IA) under section 7(1) of the Insurance Companies Ordinance (ICO) for authorisation to carry on the relevant classes of insurance business.

The main requirements for authorisation are set out in the ICO (principally section 8(3)), including requirements covering:

  • The applicant's:

    • place of incorporation (it must be a company);

    • financial status;

    • reinsurance arrangements;

    • ability to comply with the ICO; and

    • the fitness and propriety of the applicant's directors and controllers.

  • Finance including that the applicant must both:

    • have the minimum amount of paid-up share capital; and

    • maintain an excess of its assets over its liabilities of not less than the required solvency margin (to safeguard the risk that its assets are insufficient to meet its liabilities in unpredictable events).

  • An insurer must generally have a minimum paid-up share capital of HK$10 million. This is increased to HK$20 million for a composite insurer (both general and long-term business) and for an insurer carrying out statutory insurance business (mainly motor vehicle or employees' compensation). However, the minimum capital requirement is reduced to HK$2 million for a captive insurance company.

  • The insurer maintaining a solvency margin more than the statutory amount for up to three years from authorisation. For a general business insurer, the solvency margin is the greater of:

    • 20% of the relevant premium income up to HK$200 million, plus 10% of the amount by which the relevant premium income exceeds HK$200 million;

    • 20% of the relevant claims outstanding up to HK$200 million, plus 10% of the amount by which the relevant claims exceed HK$200 million.

    This is subject to a minimum of HK$10 million and increased to HK$20 million for insurers carrying on statutory business.

  • For a long-term business insurer, the solvency margin is the greater of:

    • HK$2 million;

    • the amount specified under the Insurance Companies (Margin of Solvency) Regulation (generally 4% of the mathematical reserves and 0.3% of the capital at risk).

  • For a captive insurer, the solvency margin is the greater of:

    • HK$2 million;

    • 5% of net premium income; or

    • 5% of net claims outstanding.

  • The applicant must also satisfy the IA that it will comply with the additional Authorisation Guidelines (GN1) requirements, including:

    • maintaining an office as its place of business in Hong Kong with a professional management and staff establishment appropriate to the nature and scale of its operations based in that office;

    • a locally based chief executive as its controller;

    • keeping and maintaining proper account books to enable audit and actuarial valuations;

    • sufficient financial resources to finance its operations set out in its three-year business plan;

    • financial backing of its parent or controller, who must be reputable persons of good financial standing; and

    • a board of directors with sufficient knowledge and experience of the insurance business.

  • In addition, a long-term business applicant must satisfy the IA:

    • that it has sufficient actuarial expertise, including a qualified staff actuary to advise on relevant matters (and must submit a report and certificate from the qualified actuary on the applicant's business plan confirming that prudent and satisfactory arrangements regulating actuarial matters have been made);

    • where the applicant intends to carry on investment-linked business, that it has adequate accounting procedures to properly identify and value assets and liabilities and provide timely reports to policyholders, and that it has sufficient investment management expertise to manage the invested funds.

  • An overseas applicant must also satisfy the IA that it is:

    • incorporated in a country where there is a comprehensive company law and insurance law;

    • an insurer under the effective supervision of an insurance authority in its home jurisdiction;

    • a well-established insurer with international experience and of undoubted financial standing.

Alternatively, it may establish a local subsidiary to carry on its business, thereby avoiding these additional requirements.

Various documents must be filed with the application including:

  • a business plan;

  • a market feasibility report demonstrating the viability of that business plan;

  • particulars of all directors and controllers.

The Hong Kong Federation of Insurers (HKFI) also requires its members (almost all insurers are members) to comply with its Insurers' Code.

Insurance/reinsurance intermediaries

Insurance agents. An insurance agent must be appointed by and registered with an authorised insurer. The agent must also be registered with the Insurance Agents Registration Board (IARB) (Agency Code). An insurance agent can also appoint:

  • Responsible officers (responsible for the conduct of their insurance agency business).

  • Technical representatives (who undertake the agent's day-to-day insurance agency business).

Responsible officers and technical representatives must also be registered with the IARB.

The registration requirements for insurance agents, responsible officers and technical representatives are set out in the Agency Code. These persons must be fit and proper and the Agency Code sets out the IARB's grounds in deciding this (clauses 58 to 60 and 72).

Agents must also comply with other Agency Code requirements (Minimum Requirements for Agents) concerning age, residency or work visa, educational level and the possession of minimum qualifications (clauses 61 to 70), including having passed all relevant papers of the Insurance Intermediaries Qualifying Examination (IIQE) (unless exempted). In addition:

  • The insurer must appoint its insurance agents under a written agency agreement meeting the minimum requirements of a model agency agreement adopted by the HKFI from time to time.

  • The insurer must keep, maintain and allow public inspection of a register of appointed insurance agents and a sub-register of their responsible officers and technical representatives.

  • An insurance agent cannot act for more than four insurers, of which no more than two can be long-term insurers.

  • A responsible officer or technical representative of an insurance agent cannot be a responsible officer or technical representative of another agent.

Insurance brokers. Most insurance brokers become authorised by joining one of the two authorised self-regulatory bodies (the Hong Kong Confederation of Insurance Brokers (CIB) or the Professional Insurance Brokers Association (PIBA)). Therefore, the authorisation requirements and procedure depend on that body's rules. However, taking the CIB and its Membership Regulations as an example, the applicant must comply with the minimum requirements for the authorisation of an insurance broker specified under the ICO (sections 69(2) and 70(2)) and further clarified in the IA's Minimum Requirements for Insurance Brokers guidelines. These include requirements concerning:

  • Age. The broker or its chief executive must be over 21.

  • Residency or work visa. The broker or its chief executive must be a Hong Kong permanent resident or a Hong Kong resident whose employment visa conditions do not restrict him from being engaged in insurance broking business.

  • Qualifications and experience. The broker or its chief executive must have an acceptable insurance qualification and a minimum of two years' experience in insurance in a management position and have passed the IIQE (unless exempted).

  • Capital and net assets. The applicant must have a minimum net asset value and a minimum paid-up share capital of HK$100,000.

  • Professional indemnity insurance. A minimum limit of indemnity for any one claim and in any one insurance period of 12 months of not less than the greater of HK$3 million or an amount depending on its aggregate insurance brokerage income.

  • Client accounts. Separate client accounts must be kept.

  • Books and accounts. Proper books and accounts must be kept.

The applicant must also satisfy the CIB that it is fit and proper to be an insurance broker and that its chief executive and technical representatives are also fit and proper to hold those positions.

Marketing agents. Marketing agents do not have to be licensed and are not regulated as such in Hong Kong provided their activities do not bring them within the definition of an insurance agent.

The definition of insurance agent includes not only a person who advises on insurance contracts in or from Hong Kong as an agent or sub-agent of one or more insurers, but also a person who arranges an insurance contract. If an insurer appoints a marketing agent to advertise its products in Hong Kong (for example, by arranging a marketing campaign) but the agent does not have any direct contact with prospective policyholders, this probably does not fall within the insurance agent definition.

However, if the marketing agent takes a more active role in selling the insurer's products, for example, by contacting and meeting prospective policyholders to arrange for them to take out an insurance contract (even if the actual selling of the policy is carried out, or advice is given by another insurance agent), then the marketing agent is likely to fall within the definition of an insurance agent and must be appointed by the insurer in that capacity. The key issue is whether the agent is advising on or arranging a specific insurance contract, as an insurer's agent or sub-agent, that is then entered into by a prospective policyholder.

Other providers of insurance/reinsurance-related activities

Bancassurance. While banks are predominantly regulated by the Hong Kong Monetary Authority, banks selling insurance as an insurance agency must also be registered with the IARB and comply with the requirements of Part X of the ICO. The members of staff that participate in the bank's insurance activities must also be registered as technical representatives in compliance with the Agency Code, including the requirement to take the relevant exams and fulfil the continuing professional development criteria (see Question 13).

Outsourcing. In 2012, the Office of the Commissioner of Insurance (OCI) issued Guidance Note 14 to address the outsourcing of services by insurers. Ultimately, even where the service is outsourced, the obligations of the insurer remain unchanged, and it will remain responsible for compliance with the terms of the ICO and other regulations for the outsourced services.

10. What are the main exemptions or exclusions from authorisation or licensing?

Insurance/reinsurance providers

The restriction on carrying on an insurance business in or from Hong Kong without otherwise being authorised by the Insurance Authority (IA) does not apply to:

  • Lloyd's.

  • An underwriters' association with IA approval (although to date only one has been approved).

The following are exempt from IA authorisation (section 51, Insurance Companies Ordinance ( ICO)):

  • Any body of persons, corporate or unincorporate, bound together by custom, religion, kinship, nationality or regional or local interest not for the purpose of gain, whose gross premium income does not exceed HK$500,000 in any financial year (pro-rated to 365 days if not a 12-month period under subsection (a)(i) of the ICO).

  • A person carrying on Hong Kong reinsurance business only, although this exemption does not apply to:

    • a body corporate incorporated in Hong Kong;

    • a body corporate incorporated elsewhere which has a place of business in Hong Kong;

    • any other person or any partnership having a place of business in Hong Kong;

    • a registered trade union carrying on insurance business for members' provident fund or strike benefits;

    • a registered co-operative society;

    • the Hong Kong Export Credit Insurance Corporation;

    • an authorised institution under the Banking Ordinance (limited to certain classes of business);

    • the Credit Union League of Hong Kong;

    • a recognised clearing house under the Securities and Futures Ordinance (SFO) to the extent it guarantees the settlement of securities transactions; and

    • a body authorised to provide automated trading services under the SFO to the extent it guarantees the settlement of securities transactions.

The Chief Executive in Council can exempt an insurer from the authorisation requirements of the IA (section 53, ICO).

Insurance/reinsurance intermediaries

Insurance agents. Authorised insurers and Lloyd's are not required to be appointed as insurance agents, but this does not extend to any of their agents (section 78, ICO).

Insurance brokers. Authorised insurers and Lloyd's are not required to be authorised as insurance brokers.

A person who acts in Hong Kong as an insurance broker for reinsurance contracts only is not required to be authorised as an insurance broker. However, this exemption does not apply to:

  • A body corporate incorporated in Hong Kong.

  • A body corporate incorporated elsewhere which has a place of business in Hong Kong.

  • A person represented in Hong Kong by an agent.

  • Any person or partnership having a place of business in Hong Kong.

Other providers of insurance/reinsurance-related activities

Claims handlers and loss adjusters are not subject to any specific industry regulation provided their activities do not fall within the definition of insurance agent or insurance broker.


Restrictions on ownership or control

11. Are there any restrictions on the ownership or control of insurance-related entities?

Insurance/reinsurance providers

Hong Kong does not discriminate against foreign companies. There are no restrictions on or qualifications concerning ownership or control of an authorised insurer, except that the Insurance Authority (IA) must be satisfied that all its directors and controllers are fit and proper to hold those positions (under the IA's Guidance Note 4).

There is no nationality requirement, but in determining if the applicant's directors and controllers are fit and proper there are requirements concerning their qualifications and experience. For example, an insurer's chief executive generally must hold recognised professional qualifications. An insurer must also appoint a locally based chief executive as controller.

Insurance/reinsurance intermediaries

Insurance agents. Restrictions include age, residency or unconditional employment visa and qualifications requirements for insurance agents who are individuals and for the responsible officers and technical representatives of corporate insurance agents, but there are no requirements for an insurance agent's owners or controllers (Minimum Requirements for Agents).

Insurance brokers. The position is similar to that for insurance agents. A broker and its chief executive and technical representatives must be fit and proper, and satisfy the Minimum Requirements for Insurance Brokers (see Question 9) including those regarding age, residency or unconditional employment visa and the possession of minimum qualifications.

Other providers of insurance/reinsurance-related activities

Claims handlers and loss adjusters are not subject to any specific industry regulation provided their activities do not fall within the definition of insurance agent or insurance broker.

12. Must owners or controllers be approved by or notified to the relevant authorities before taking, increasing or reducing their control or ownership of the entity?

Insurance/reinsurance providers

Before authorising the applicant as an insurer, the Insurance Authority (IA) must be satisfied that the applicant's directors and controllers are fit and proper to hold these positions (GN4: Guidance Note on "Fit and Proper" Criteria under the Insurance Companies Ordinance (ICO)).

A controller of an authorisation applicant includes not only its directors and chief executive but also any person (section 9, ICO):

  • In accordance with whose directions or instructions the directors of the applicant or of a body corporate of which the applicant is a subsidiary (or any of them) are accustomed to act.

  • Who, alone or with any associate or through a nominee, is entitled to exercise or control the exercise of, 15% or more of the voting power at any general meeting of the applicant or a body corporate of which it is a subsidiary.

The consent of the IA is required where a person proposes to become this second type of "owner" controller of an authorised insurer incorporated in Hong Kong (section 13B, ICO). Similarly, regardless of where they were incorporated, authorised insurers must obtain the IA's consent to the appointment of a managing director or chief executive (section 13A, ICO).

In either case, the IA may, within three months of receiving the relevant notice, object to the proposed accession or appointment because that person is not fit and proper to hold that position. Unless three months have expired without notice from the IA of such objection (or confirmation that the IA has no objection), the accession or appointment constitutes a criminal offence.

Miscellaneous changes to the particulars of insurers and their directors and controllers, including the cessation of persons as directors or controllers, must also be notified to the IA (section 14, ICO).

Insurance/reinsurance intermediaries

There are various restrictions set out in section 65 of the ICO on a person who is a proprietor, director or employee of, or partner in, an insurance agent or insurance broker being a proprietor, director or employee of, or partner in, another insurance agent or insurance broker.

Insurance agents. The IA may not consider a corporate insurance agent fit or proper to act, or to continue to act, as an insurance agent if any of its directors or controllers would not be considered fit and proper to act as an insurance agent were they to apply as an individual (except for requirements that they are Hong Kong permanent residents with the necessary qualifications and or industry experience and have passed the Insurance Intermediaries Qualifying Examination (IIQE)). A controller under the Agency Code has the same meaning as defined in the ICO (section 9, ICO).

Insurance brokers. A corporate insurance broker must satisfy the IA that its directors and controllers are fit and proper to hold those positions. The IA's Minimum Requirements for Insurance Brokers sets out further guidance on how the IA applies this test.

Other providers of insurance/reinsurance-related activities

Claims handlers and loss adjusters are not subject to any specific industry regulation provided their activities do not fall within the definition of insurance agent or insurance broker.


Ongoing requirements for the authorised or licensed entity

13. What are the key ongoing requirements with which the authorised or licensed entity must comply?

Insurance/reinsurance providers

The main ongoing regulatory requirements for authorised insurers are set out in Part III of the Insurance Companies Ordinance (ICO) and are summarised below.

  • Auditor. An insurer must appoint a qualified auditor in the place where the insurer is incorporated and notify the Insurance Authority (IA) of the identity of, and any change in, that auditor.

  • Books of account and returns. The insurer must maintain proper and legible account books recording and explaining all the insurer's transactions. The insurer must make all required returns to the IA of accounts, reports, statements and other information required under the ICO.

  • Annual fee. An annual fee is payable to the IA, the amount depending on the class of business carried out by the insurer.

  • Maintenance of assets in Hong Kong. General insurers (but not reinsurers or captive insurance companies) are, unless exempted by the IA, required to maintain assets in Hong Kong of an amount and type determined under section 25A of the ICO.

  • Further requirements for insurers carrying on long-term business. The insurer must:

    • appoint a duly qualified actuary, who must comply with the standards specified in the Insurance Companies (Actuaries' Standards) Regulation (or other standards accepted as comparable by the IA), and notify the IA of any change in that actuary;

    • notify the IA of the arrangements for the actuary to have direct access to the board of directors of the insurer to enable them to carry out their duties;

    • comply with both:

    • section 22 of the ICO for the continued separation of assets and liabilities attributable to that long-term business (or, if the long-term insurer is incorporated outside Hong Kong, and with prior IA authorisation, attributable only to that part of its long-term business carried out in Hong Kong; and

    • section 11 of the Solvency Regulations that not less than one-sixth of the solvency margin is held in its long-term business funds.

The Insurers' Code applies to all Hong Kong Federation of Insurers (HKFI) members when effecting insurance in Hong Kong for individual policyholders resident in Hong Kong and insured in their private capacity.

The main ongoing requirements relate to:

  • Using plain language in their documentation and ensuring sales materials and illustrations contain information that is accurate and easy to understand.

  • Efficient and fair handling of claims.

  • Managing, and handling complaints against, their agents.

  • Managing employees.

  • Avoiding misconduct.

  • Efficient and fair handling of enquiries, complaints and disputes.

The principal IA Guidance Notes containing ongoing obligations are:

  • GN3: prevention of money laundering.

  • GN8: use of the internet.

  • GN10: corporate governance.

  • GN14: outsourcing.

Insurance/reinsurance intermediaries

Insurance agents. There are various ongoing obligations for agents (sections 71 to 74 (for general agents) and sections 75 to 79 (for life agents), Agency Code). Agents must always conduct business in good faith and with integrity, and comply with the other Agency Code requirements relating to their dealings with, and information they must provide to existing and prospective policyholders.

Insurance brokers. Authorised insurance brokers must submit to the IA:

  • Annual audited financial statements.

  • An auditor's report on those financial statements confirming the broker continues to satisfy the minimum requirements for capital and net assets, professional indemnity insurance, keeping of separate client accounts and the keeping of proper books and accounts.

  • Such further evidence the IA may require to demonstrate the broker has continued to comply with the requirements in Question 9.

Continuing professional development (CPD) requirements. Insurance intermediaries and their chief executives, responsible officers and technical representatives must comply with the CPD programme requirements under the Insurance Intermediaries Quality Assurance Scheme (IIQAS). The current requirement is to complete at least ten CPD hours annually, generally obtained by attending accredited training courses. Failure to comply is likely to lead to disciplinary action including de-registration or de-authorisation.

Other providers of insurance/reinsurance-related activities

Claims handlers and loss adjusters are not subject to any specific industry regulation provided their activities do not fall within the definition of insurance agent or insurance broker.


Penalties for non-compliance with legal and regulatory requirements

14. What are the possible consequences of an entity failing to comply with applicable legal and regulatory requirements? What recourse do policyholders have if they have done business with a non-approved entity?

Insurance/reinsurance providers

It is an offence for an unauthorised person to carry on any class of insurance business in or from Hong Kong (section 6(3), Insurance Companies Ordinance (ICO)). The maximum penalty for this offence is a fine of HK$2 million and an additional daily fine of HK$2,000 for each day during which the offence continues and up to two years' imprisonment.

Where an insurance contract in relation to any class of insurance business (not being a reinsurance business) is entered into by an insurer who is not authorised to carry on that class of business, that contract is, at the option of the policyholder, either:

  • Enforceable against the insurer by the policyholder.

  • Void by reason of that contravention (in which case the policyholder may, before the expiration of that contract, recover from the insurer any consideration paid by it under the contract).

A large number of ICO requirements include a provision that any insurer who fails to comply commits an offence and is liable to a fine (and sometimes a daily fine for each day the offence continues).

The Insurance Authority (IA) can intervene in an authorised insurer's business in certain circumstances including if it considers it desirable for existing or potential policyholders' protection against the risk the insurer will be unable to meet its liabilities to them, if (Part V, ICO):

  • The insurer has either:

    • failed to satisfy an ICO obligation; or

    • provided misleading or inaccurate information to the IA.

  • The IA considers the insurer may be insolvent. This power includes the very wide right under section 35 of the ICO to require an insurer to take such action in relation to its affairs, business or property as the IA considers appropriate, to safeguard existing or potential policyholders' interests.

Insurance/reinsurance intermediaries

Insurance agents. It is an offence for a person to hold themselves out as an insurance agent if they are not an appointed insurance agent. Penalties range from a fine of up to HK$1 million and up to two years' imprisonment on indictment, and up to HK$100,000 and up to six months' imprisonment on summary conviction (section 77(1), ICO).

The Agency Code sets out the power of the Insurance Agents Registration Board (IARB) to:

  • Handle complaints.

  • Take disciplinary action against agents and their responsible officers and technical representatives.

  • Require an insurer to take disciplinary action against its agents.

Disciplinary action can involve:

  • Issuing a reprimand.

  • Suspending or terminating the agent's contract.

  • Requiring the agent to take or refrain from taking such action as the IARB thinks fit.

The IARB has also issued guidelines on how it will exercise its powers under the Agency Code including Guidelines on Misconduct and Guidelines on Handling of Premiums.

The IA can require an insurer to deregister any of its insurance agents that fail to comply with the Agency Code.

Insurance brokers. It is an offence for a person to hold themselves out as an insurance broker if they are not an authorised insurance broker (section 77, ICO), carrying the same penalties as the comparable offence for an insurance agent (see above, Insurance agents).

Each approved body of insurance brokers must have procedures to deal with breaches of proper conduct by its members. The IA can withdraw a broker's authorisation if it fails to comply with the minimum authorisation requirements (see Question 9) or this withdrawal is justified in existing or potential policyholders' or the public's interests (section 75, ICO). The IA can petition to wind up a corporate broker or bankrupt an individual broker if it considers it in the public interest (section 76, ICO).

Other providers of insurance/reinsurance-related activities

Claims handlers and loss adjusters are not subject to any specific industry regulation provided their activities do not fall within the definition of insurance agent or insurance broker.

Unauthorised brokers and non-appointed agents

An insurer cannot enter an insurance contract through an insurance intermediary in Hong Kong or accept insurance business referred to it by an insurance intermediary in Hong Kong if that intermediary is not an appointed insurance agent or an authorised insurance broker. If an insurer does so, the contract is void at the option of the policyholder, and if the policyholder chooses to treat the contract as void, it is entitled to the return of its premium.

ICO breaches

There are various offences for insurers or insurance intermediaries who breach the provisions of Part X of the ICO (section 77, ICO) including:

  • An insurer who effects an insurance contract through an insurance intermediary who is not an authorised insurance broker or appointed insurance agent commits an offence and is liable to a maximum fine of HK$1 million and up to two years' imprisonment.

  • An agent (or principal) who fails to comply with the Agency Code may be subject to criminal prosecution and a fine of up to HK$100,000.

  • An authorised insurance broker who fails to keep client monies in separate accounts is liable on conviction upon indictment to a maximum fine of up to HK$1 million and up to five years' imprisonment.

Personal liability

A controller, director, manager or other officer of an insurer or insurance intermediary committing an offence under the ICO commits the same offence if it is committed with the consent or connivance of, or because of the neglect by, that person (section 57, ICO).


Restrictions on persons to whom services can be marketed or sold

15. Are there any restrictions on the persons to whom insurance/reinsurance services and contracts can be marketed or sold?

The usual English common law contractual principles apply to insurance/reinsurance contracts and a party to a contract is presumed to have capacity unless proven otherwise.

A minor (aged under 18) can enter into an insurance contract. However, that contract will be voidable at the election of the minor, unless the contract is a contract for necessaries. In respect of minors, contracts for necessaries are contracts for the supply of goods or services deemed beneficial or necessary to them. Ordinarily, a contract made with a minor is voidable at the option of the minor. However, under section 4 of the Sale of Goods Ordinance (Cap. 26), minors are bound under contracts for necessaries. The position at common law is similar, and therefore minors are bound by contracts for necessaries for the supply of services as well.

In order to avoid this problem, most insurers will enter into the insurance contract with a trustee or guardian for the minor and allow for the minor to be named as a beneficiary.

In addition to the common law principles the proposed insured must also have an insurable interest (see Question 3).


Reinsurance monitoring and disclosure requirements

16. To what extent can/must a reinsurance company monitor the claims, settlements and underwriting of the cedant company?

There is no implied duty or right implied into a reinsurance contract for the cedant to consult with or obtain the consent of the reinsurer before the cedant settles a claim by the insured. However, the reinsurance contract usually includes express claims co-operation and claims control clauses.

A claims co-operation clause usually requires the insurer to notify the reinsurer of a claim under the underlying insurance, and to consult with and co-operate with the reinsurer in settling that claim. It may also require the insurer to obtain the reinsurer's prior consent before settling the claim. A claims control clause goes further and gives the reinsurer the right to deal with and settle claims directly with the insured.

The reinsurance contract often includes a "follow the settlements" clause obliging the reinsurer to follow any settlement reached by the insurer with the insured. Even if there is no express follow the settlements requirement, the Hong Kong Court of Appeal case of New Hampshire Insurance Co v Grand Union Insurance Co Ltd & Anor [1995] 2 HKC 1 held that the reinsurer must follow the settlements of the insurer as a matter of common law.

It is common for the reinsurance contract to give the reinsurer access rights to the settlement records of the cedant to check the settlement terms. A contractual term allowing the reinsurer reasonable access to the cedant's settlement records on reasonable notice is also implied. However, the reinsurer has no implied right of access to the insurer's underwriting files or information, and it is unusual for the reinsurer to expressly have this contractual right.

17. What disclosure/notification obligations does the cedant company have to the reinsurance company?

Since a reinsurance contract is simply an insurance contract between insurers, the cedant company has the same general disclosure and notification obligations that an insured has under an insurance contract. These obligations arise out of the duty of utmost good faith, including that the cedant must:

  • Disclose to the reinsurance company all facts of which it is aware, or deemed to be aware (and of which the reinsurer is not aware or deemed to be aware) which may affect the reinsurer's decision to enter into the reinsurance contract, or the terms on which it is prepared to do so.

  • Avoid making misrepresentations before entering into the insurance contract. The usual misrepresentation principles under English law apply.

  • Avoid material non-disclosure. The onus is on the reinsurer to prove the undisclosed information was:

    • material;

    • within the knowledge of the insurer; and

    • not communicated to the reinsurer.

Material matters for the cedant in relation to the underlying insurance contract are likely to be material to the reinsurer, particularly for facultative reinsurance that is generally considered to involve the insurance of the same subject matter as the underlying policy.

The reinsurance policy may also impose disclosure and notification obligations on the cedant, by setting out express terms or by incorporating these terms from the underlying insurance contract.


Insurance and reinsurance policies

Content requirements and commonly found clauses

18. What are the main general form and content requirements for insurance policies? What are the most commonly found clauses?

Form and content requirements

Generally, there are no statutory requirements for the form and content of insurance policies. The principal exceptions are:

  • Life insurance.

  • Motor vehicle insurance.

  • Employees' compensation insurance.

  • Marine insurance.

  • Investment-linked insurance.

Life insurance

A life insurance contract must name the beneficiary or a readily identifiable class of beneficiaries (for example, grandchildren) otherwise it will be void.

Motor vehicle insurance

The Motor Vehicles Insurance (Third Party Risks) Ordinance (MVIO) makes it unlawful for a person to use, or permit another person to use, a motor vehicle on a road unless an insurance policy is in force insuring these persons for any liability they may incur in relation to the death of or bodily injury to any person caused by or arising out of the use of that motor vehicle on a road. Certain provisions of the MVIO dictate an insurer's policy terms, including that:

  • Any condition precedent or condition subsequent to liability is of no effect.

  • The insurer cannot avoid or restrict its liability by reference to various matters including the age or physical or mental condition of the driver or the vehicle's condition (section 12(1), MVIO).

Employees' compensation insurance

The Employees' Compensation Ordinance (ECO) requires an employer in Hong Kong to maintain an insurance policy to cover its liabilities to pay compensation for injury by accident or for the death of employees arising out of or in the course of their employment. Sections 40A and 41(1) of the ECO require the insurer to include certain information in that policy, including the:

  • Employer's name.

  • Insured's name.

  • Policy number.

  • Date of policy's issue.

  • Dates of commencement and expiry of the period of insurance.

  • Number of employees insured under the policy at the time of issue.

  • Amount of the liability insured under the policy.

Marine insurance

The Marine Insurance Ordinance (MIO) requires that a contract of marine insurance must:

  • Specify the assured's name or that of some person who effects the insurance on the assured's behalf.

  • Designate, with reasonable certainty, the subject matter insured.

Investment-linked insurance policies

Certain ICO Class C investment-linked life insurance policies fall within the definition of a collective investment scheme under the Securities and Futures Ordinance (SFO). In this context, the Insurance Authority's Guidance Note 11 provides further guidance on the classification of Class C insurance business. Insurers issuing these collective investment scheme products must seek authorisation from the Hong Kong Securities and Futures Commission (SFC) for the product's marketing materials, which may include the SFC's authorisation of the products themselves (sections 103 to 105, SFO). The SFC has produced a checklist of provisions that must be included in such marketing materials for them to be approved and to allow these products to be sold.

Other relevant ordinances

The following ordinances may also be relevant:

  • The Misrepresentation Ordinance (a term purporting to exclude liability for misrepresentation is only valid if reasonable).

  • The Unconscionable Contracts Ordinance (under which the court has broad powers to grant relief in relation to an unconscionable term in a consumer contract including holding this term or the entire contract unenforceable).

  • The Supply of Services (Implied Terms) Ordinance (under which certain terms are implied into contracts for the supply of services, including an insurance term).

An insurer cannot exclude or limit its liability for its appointed insurance agent's actions in the agent's dealings for the issue of an insurance contract and insurance business relating to that contract (section 68(2), Insurance Companies Ordinance (ICO)).

Hong Kong Federation of Insurers (HKFI) Code of Conduct

Under the Insurers' Code, HKFI members must draft policy documentation for consumer insurance contracts in plain and simple language.

Common clauses

A valid insurance contract must contain agreed terms to govern various aspects including the:

  • Subject matter of the policy.

  • Obligation to indemnify (other than for life contracts).

  • Duration of the risk.

  • Premium amount.

  • Sum insured.

19. Is facultative or treaty reinsurance more common? What are the most commonly found clauses in reinsurance policies?

Facultative/treaty reinsurance

Proportional treaty reinsurance is the most common form of reinsurance in Hong Kong. Facultative treaties tend to be used for large or unusual risks and are therefore less common.

Commonly found clauses

Generally the terms of a reinsurance contract will seek to address:

  • The rights of the reinsurer, such as:

    • a right to payment of the premium by the reinsured;

    • a right to inspect records kept by the reinsured.

  • The obligations of the reinsurer, such as:

    • the losses for which the reinsurer is liable;

    • the timing of the reinsurer's liability, that is, when the reinsured makes payment to the insured.

  • The reinsurer's involvement in the claims process, including:

    • that claims are to be managed directly by the reinsurer; or

    • a co-operation provision to ensure that the reinsured co-operates fully with the reinsurer throughout settlement negotiations.

  • A "follow the settlements" clause, which binds the reinsurer to follow any settlement agreed between the reinsured and the insured.

The courts have sought to imply a duty on the reinsured to exercise reasonable care and skill. This is to include, among other things, a duty to:

  • Keep records of the terms of the insurance, including the risks and premiums received.

  • Properly investigate all claims in order to establish whether they fall within the terms of the insurance.

  • Ensure that all amounts due and owing are promptly collected from the insured.


Implied terms

20. Are there any terms that are implied by law or regulation (even if not included in the insurance or reinsurance contract)?

The duty of utmost good faith applies to all insurance contracts. This duty is specifically incorporated into marine insurance contracts (section 17, Marine Insurance Ordinance (MIO)) and means that the insured must disclose to the insurer all facts of which the insured is aware (and of which the insurer is not aware or deemed to be aware) which may affect the insurer's decision to enter into the insurance contract or the terms on which it is prepared to do so. It also means the insured must:

  • Not make misrepresentations before entering into the insurance contract (English legal misrepresentation principles apply).

  • Avoid material non-disclosure.

Breach of this duty allows the insurer to avoid the policy (provided it establishes inducement to enter into that policy by a material false statement).

The insurer owes the same duty to the insured (although under the scope of that duty, it is harder to define what is material to the insured).

Other terms implied into an insurance contract are:

  • That the insured must have an insurable interest.

  • The existence and identification of the subject matter of the insurance.

  • The insurer's subrogation rights.

An insurer cannot exclude or limit its liability for its appointed insurance agent's actions in the agent's dealings for the issue of an insurance contract and insurance business relating to that contract (section 68(2), Insurance Companies Ordinance (ICO)).


Customer protections

21. How do customer protections in the general law affect insurance contracts? What customer protections are generally included in insurance policies to supplement this?

The Office of the Commissioner of Insurance (OCI) and the insurance industry have taken a series of measures to enhance consumer protection for long-term insurance policies. These measures include:

  • A customer protection declaration form.

  • A cooling-off period for long-term insurance policies.

  • Illustration standards for long-term insurance policies.

  • Customer suitability assessment and post sales controls for investment-linked assurance scheme (ILAS) products.

Customer protection declaration form (CPDF)

The CPDF was introduced under the Code of Practice for Life Insurance Replacement issued by the insurance industry as a self-regulatory measure. Where an existing life policy is replaced (or where 50% or more of the guaranteed cash value of the existing policy is reduced), the CPDF must be completed to confirm the insurance intermediary has clearly explained to the policyholder the consequences and potential disadvantages. The policyholder must also be provided with the OCI's pamphlet on the subject.

Cooling-off period for long-term insurance policies

Policyholders are given a cooling-off period in which to review, cancel and obtain a full refund or premium (less a market value adjustment where applicable) on their long-term insurance policy. The cooling-off period ends 21 days after the earlier of delivery to the policyholder or their representative of either:

  • The policy.

  • A notice informing the policyholder of the availability of the policy for collection and the expiry date of the cooling-off period.

Insurers must keep a copy of the acknowledgement of the receipt of the policy or the notice to confirm when the cooling off period ends. The new period is effective 1 February 2010.

Illustration standards for long-term insurance policies

To enhance the transparency of life policies and enable prospective policyholders to make informed decisions, insurers must provide prospective policyholders with a summary (in the required form), of:

  • Insurance benefits.

  • Investment returns.

  • Surrender values.

Customer suitability assessment and post sales controls for investment linked assurance scheme (ILAS) products

The OCI published Guidance Note 15 (GN15) on 10 December 2014 which sets out the proper standards of conduct and business practices for authorised insurers writing ILAS products.

ILAS products are hybrid products with both insurance and investment elements. As they are long-term insurance contracts, they normally have a more complex charging structure and the investments involved do not have the same level of liquidity as other forms of investment.

GN15 provides the following guidelines:

  • Product design. There must be insurance value to clients, fees and charges should be fair, the product itself must be sustainable.

  • Suitability assessment. ILAS products should only be sold to clients with both investment and insurance needs, insurers should seek information from clients to assess the suitability of the product for them, clients' needs should be properly assessed through a Financial Needs Analysis form, and suitability assessments should be conducted whenever the client experiences a change in circumstances.

  • Advice to clients. clients must be advised of all product features including fees and charges, surrender penalties, product and investment risks.

  • Appropriate remuneration structure. There is a duty to ensure remuneration structure for intermediaries does not encourage misselling and aggressive selling, indemnity commission or any standing arrangement that offers advance payment of commission is strictly prohibited, and an appropriate clawback period must be implemented.

  • Avoidance of conflicts of interest. Any conflicts of interest must be appropriately managed.

  • Clients' investments and assets. Policyholders' investment instructions must be strictly followed.

  • Post-sale control. It must follow the sales process flowchart in the Appendix of the Guidance Note, must make audio-recorded post-sale confirmation calls to all clients within five working days of the policy issue.


Standard policies or terms

22. What are the main standard policies or terms produced by trade associations or relevant authorities?

The Hong Kong Federation of Insurers (HKFI) has produced the following standard form insurance policies and terms:

  • Building owners' corporation third party liability insurance policy.

  • Commercial vehicle insurance policy.

  • Compulsory third party liability insurance clauses (local vessels).

  • Employees' compensation insurance policy.

  • Premium adjustment and declaration of earnings form.

  • Motorcycle insurance policy.

  • Motor trade insurance policy.

  • Private motor car insurance policy.

These can be downloaded from the HKFI website (


Insurance and reinsurance policy claims

Establishing an insurance claim

23. What must be established to trigger a claim under an insurance policy?

The trigger for a claim depends on the policy's notification provisions. Typically, the insured must notify the insurer of one or more of the following:

  • Any occurrence which may give rise to a claim against the insured.

  • Any loss suffered by the insured.

  • Any claim made against the insured.

  • Any circumstances that may give rise to a loss suffered by the insured or to a claim made against the insured.

  • For fidelity policies, reasonable suspicion of an employee's fraud or dishonesty, irrespective of whether loss has been suffered.


Third party insurance claims

24. What are the circumstances in which third parties can claim under an insurance policy?

An insured's rights under an insurance policy can be transferred to and vest in a third party (section 2(1), Third Parties (Rights Against Insurers) Ordinance) when the insured satisfies all the following:

  • It is insured against liabilities it may incur to the third party.

  • It has become bankrupt (if an individual) or (if a company) has had a winding-up order made against it, or a resolution for a voluntary winding-up has been passed, or a receiver or manager has been appointed, or debenture holders have taken possession of property subject to a floating charge.

  • Before or after the bankruptcy or insolvency event in question, the insured has incurred a liability to the third party.

Section 2(1) does not apply where a company is wound up voluntarily purely to reconstruct or amalgamate with another company.

Generally, the rights that the third party acquires under this Ordinance are not superior to the insured's rights.

The Contracts (Rights of Third Parties) Ordinance was passed into law in December 2014 and will apply to insurance contracts. The commencement date has yet to be announced but the Ordinance is expected to come into force later this year.

In brief, the Ordinance provides that if a term of a contract expressly, or under proper construction, purportedly grants benefits to a third party, then the third party can enforce the terms of the contract against the parties to the contract, provided that the parties have not expressly excluded the application of the legislative scheme.

This scheme is likely to impact the insurance industry in the following ways:

  • For general insurance contracts, it will allow third parties benefitting under an insurance policy to take legal action against the insurer as long as they are identified in the contract and the parties have not opted out of the legislative scheme in the contract.

  • For life insurance contracts, third parties will be able to directly enforce their rights without having to rely on statutory and common law exceptions.

  • Insurers may now be liable to third parties who do not have to abide by the duty of utmost good faith which is imposed on all insureds.

While insurers are likely to be exposed to greater liability under the scheme, the Ordinance contains a provision granting them the right to raise any defences in any third party action which would have been available had the action been commenced by the insured.

Further, it is possible to contract out of the legislative scheme and it is envisioned that most insurers will adopt this approach at least initially.


Time limits

25. Is there a time limit outside of which the insured/reinsured is barred from making a claim?

Under a liability policy, the insured generally has six years (Limitation Ordinance) to issue proceedings against the insurer. Time starts to run from the date liability is established by a judgment, arbitration award or binding settlement. However, it is possible for the parties to agree to a shorter or longer limitation period, and the courts generally enforce this.



26. Can the original policyholder or other third party enforce the reinsurance contract against a reinsurer?

There is no contractual relationship between the original policyholder and the reinsurer, so the policyholder does not acquire any contractual rights against the reinsurer and cannot bring a contractual claim against it directly.

Once the Contracts (Rights of Third Parties) Ordinance comes into force, if the reinsurance contract between the insurer and the reinsurer expressly or purportedly grants rights to a third party, then the third party will be able to enforce the terms of the reinsurance contract against the insurer and the reinsurer. It is possible that in certain circumstances this could extend to an original insured, but these cases are rare. This is provided that the parties have not expressly excluded the application of the legislative scheme to the reinsurance contract.



27. What remedies are available for breach of an insurance policy?


Generally, insurers are entitled to damages (on proof of loss) if an insurance policy is breached. However, if the insured has breached a condition precedent, a range of remedies may be available to the insurer, depending on the type of condition precedent. A condition can be a condition precedent to the:

  • Validity of the policy (for example, a requirement to pay the premium), that is, the contract does not exist if the condition is not satisfied.

  • Inception of risk (for example, recommendations from a survey to be implemented before coverage will attach), that is, the policy only offers protection once the condition has been satisfied.

  • Insurer's liability under the policy (for example, a requirement for the insured to notify the insurer of a loss or claim within a specified period of time), that is, the insurer does not incur liability for the loss or claim unless the condition is satisfied.

A term in an insurance contract can be expressed as a warranty, that is, a term whereby the insured promises either that a given state of affairs existed before the commencement of the policy, or that it will continue to exist while the policy remains in force. A breach of warranty discharges the insurer from liability under the policy from the time of the breach. There is no requirement for the insurer to demonstrate that the warranty was material to the risk insured or the loss that may have been suffered.


Where the insurer is in breach of the contract, the insured can elect to either affirm the policy or to treat it as terminated. In both instances, the insured will be entitled to damages for loss suffered as a result of that breach.

Where the insured terminates the policy it is likely that damages will at least be equal to premiums paid under the policy, although concession may be given where the insured has received some benefit under the policy before termination. This argument has not been explored in the courts so it is not clear whether it would be accepted.


Punitive damage claims

28. Are punitive damages insurable? Can punitive damages be reinsured if they are covered by an underlying policy?

There is nothing to prevent the insurance of punitive damages under Hong Kong law, except where the liability for the punitive damages is attributable to an intentional criminal act committed by the insured. In reality, the scope of the insurer's liability to indemnify an insured in respect of punitive damages will be determined by the terms of the policy and the circumstances in which the damages arise. Equally, there is nothing to prevent the reinsurance of such liability, subject to the terms of the reinsurance contract.


Insolvency of insurance and reinsurance providers

29. What is the regulatory framework for dealing with distressed or insolvent insurance or reinsurance companies, or other persons or entities providing insurance or reinsurance related services? What regulatory and/or other protections exist for policyholders if the insurance company is insolvent?

Except for the Insurance Companies Ordinance (ICO) provisions relating to insolvent insurers (see below), there is no specialist regime for dealing with insolvent insurers or insurance intermediaries. The usual insolvency regime applies, which is similar to the English insolvency regime (although there are a number of differences such as the absence of any administration process for restructuring insolvent companies).

Corporate insolvencies fall within the regulatory framework established by the Companies (Winding Up and Miscellaneous Provisions) Ordinance (C(WUMP)O) supplemented by the Companies (Winding Up) Rules. Some provisions of the Bankruptcy Ordinance also apply. Creditors have a number of options including:

  • Appointing a receiver.

  • Negotiating a restructuring.

  • Applying to the court for the appointment of a provisional liquidator or for the court to sanction of a scheme of arrangement.

  • Winding up the insolvent company.

The Court of First Instance can wind up an insolvent insurer in accordance with the C(WUMP)O subject to the following modifications (Part VI, ICO):

  • The insurer can be wound up on the petition of ten or more policyholders.

  • The winding-up petition cannot be presented except with the leave of the court.

  • It cannot grant that leave unless it is satisfied that a prima facie case for winding up has been made out and security for costs for the amount the court thinks reasonable has been given.

  • The insolvent insurer cannot be wound up voluntarily unless the court orders otherwise, and it cannot make that order unless a copy of the application for that order is served on the Insurance Authority (IA) (with the IA being entitled to be heard on that application and to call, examine and cross-examine witnesses and to support or oppose the making of the order as it sees fit).

  • Where the petition is brought by anyone other than the IA, a copy of the petition must be served on the IA and it has the right to be heard on the petition and to call, examine and cross-examine witnesses and to support or oppose the making of the winding up order as it sees fit.

The IA can wind up an insurer in accordance with the C(WUMP)O (and can also apply for the appointment of a provisional liquidator) if the insurer either:

  • Is unable to pay its debts.

  • Has failed to discharge its obligations under the ICO (including specifically its obligation to keep and preserve and produce proper books of account).

The IA can petition to wind up that insurer on just and equitable grounds, but only if it appears to the IA that it is expedient in the public interest for that insurer to be wound up (section 44, ICO and sections 177 to 178 and 327, C(WUMP)O).

The other special provisions of the ICO relating to insolvent insurers are:

  • Section 46. The liquidator of a long-term business must carry on that business with a view to it being transferred as a going concern to another insurer, and may appoint a special manager for this purpose (but cannot issue any new policies).

  • Section 47. Where an insurance business is transferred and the transferor or its creditors have claims against the transferee and the transferee is wound up, the court must wind up the transferor and may appoint the same liquidator over both.

  • Section 48. Where an insurer is unable to pay its debts, the court may reduce the amount of the insurer's contracts as it sees fit rather than making a winding up order.

The IA also has significant powers of intervention (see Question 14) and one of the grounds on which it can exercise those powers is if the authorised insurer is unable to pay its debts.

A number of funds have also been established to assist persons attempting to recover from an insolvent insurer.

Motor Insurers' Bureau (MIB)

The MIB (see box, Main insurance/reinsurance trade organisations) was formed to provide compensation to traffic accident victims where the driver at fault is uninsured or untraceable, or where the relevant insurer is insolvent. All insurers authorised by the IA to carry on statutory motor insurance business in Hong Kong must be MIB members. The MIB administers two funds, which are financed by levies on the premiums for policies for compulsory motor insurance business:

  • The First Fund. This provides compensation to traffic accident victims who suffer bodily injury (or their dependants if they die), but who cannot obtain compensation because the driver at fault is uninsured or untraceable. When motor insurers became capable of limiting third party liability, the First Fund was extended to cover awards exceeding that limit.

  • The Insolvency Fund. This compensates third parties making claims for bodily injury, death or property damage resulting from a traffic accident where that claim remains unsettled because the insurer is insolvent.

Employees' compensation assistance scheme

This is a statutory scheme introduced by the Employees' Compensation Assistance Ordinance and forms a fund administered by the Employees' Compensation Assistance Fund Board. The fund is built up from levies collected through premiums paid by employers for compulsory employees' compensation insurance. The fund protects those employers, where their insurer is insolvent, and their employees, if they cannot recover statutory compensation or common law damages from their employer awarded to them by a court or tribunal of competent jurisdiction in Hong Kong.

Employees Compensation Insurance Residual Scheme

Following encouragement by the Hong Kong Government, the Hong Kong Federation of Insurers established the Employees' Compensation Insurance Residual Scheme in 2007. This scheme provides for last resort covers to employers encountering difficulties in taking out employees' compensation insurance (EC insurance).

Policyholders' Protection Fund

See Question 36.

30. Can excess insurance policies "drop down" to provide coverage if the primary insurer goes into insolvency?

The purpose of an excess insurance policy is to indemnify the insured once all relevant underlying policies are exhausted. Therefore, such a policy is only triggered once the underlying insurer has satisfied their liability in respect of the claim.

Where an underlying insurer becomes insolvent without having indemnified the insured under the policy, the insured becomes a creditor of the insolvent estate of the insurer and, except where there is clear wording to the contrary, the excess policy is not triggered.

31. Is a right to set-off mutual debts and credits recognised in an insolvency proceeding involving an insurer or reinsurer?

Where the insurance company is incorporated or registered under the Companies Ordinance, section 264 of the Companies (Winding Up and Miscellaneous Provisions) C(WUMP)O provides that, among other such principles to be applied as in ordinary insolvency proceedings, section 35 of the Bankruptcy Ordinance is applicable. This confirms the statutory right of set-off of mutual debts in the insolvency of an insurance company.

However, it should be noted that for insolvent non-life insurers, claims other than for a refund of premium may be entitled to preferential treatment and, in respect of insolvent life insurers, the court may reduce the liability of-long term insurance contracts of the insurer on terms it considers appropriate.


Taxation of insurance and reinsurance providers

32. What is the tax treatment for insurers, reinsurers, and other persons or entities providing insurance and reinsurance-related services?

General principles

Hong Kong operates a territorial system of taxation. Profits derived by an entity carrying on business in Hong Kong are generally subject to Hong Kong profits tax at the prevailing rate of 16.5% if the profits are Hong Kong source and not of a capital nature. However, certain categories of income are specifically exempt from Hong Kong profits tax including dividend income from Hong Kong corporations, bank interest and capital gains. Offshore sourced profits such as dividends from foreign companies, or gains on sale of foreign assets are also not taxable.

Ascertaining the source of profits is a question of fact determined principally by what the taxpayer has done to earn the profit in question and where he has done it. The operations test therefore requires all the factors giving rise to the relevant income to be considered to ascertain the source of profits and weighing up those factors to decide where, in substance, the activities that generate the relevant income are undertaken. Where the operations giving rise to profits are in Hong Kong, then profits should be regarded Hong Kong source.

Expenses are generally deductible in determining assessable profits to the extent the expenses are incurred in the earning of assessable profits and are not considered capital expenditure. There are specific provisions in the Inland Revenue Ordinance (IRO) that deem certain items of expenditure to be specifically deductible or non-deductible.

However, for insurance companies, there are specific taxation provisions in the IRO to determine the assessable profits from life insurance and non-life insurance business, as well as reinsurance of offshore risks and captive insurance business.

Section 23: life insurance

This deals with the calculation of assessable profits of life insurance operations. However, it is important to note that life insurance operations for Hong Kong profits tax purposes only includes certain classes of long-term business under the Insurance Companies Ordinance (ICO). The profits from any other businesses the taxpayer undertakes will be assessed separately according to the general principles. It provides for two methods of assessment:

  • Calculating the assessable profits from life insurance business at 5% of the insurance premiums, net of reinsurance ceded, from life insurance business undertaken in Hong Kong. These premiums generally include all premiums received or receivable in Hong Kong from both residents and non-residents.

  • Electing to be taxed on the adjusted surplus method. This election is valid only if the insurer submits a certified true copy of the actuarial report to the Commissioner of Inland Revenue not later than two years after the end of the accounting period for which it is made. The election is irrevocable and applies to the years elected and all subsequent years. The adjusted surplus is the amount by which the life insurance fund exceeds the estimated liability of the company on that fund at the end of the period for which the actuarial report is made (after taking into account the surplus or deficit of that fund brought forward from the previous periods, and any adjustments made according to the specific provisions under the IRO). The adjusted surplus is apportioned according to the ratio of aggregate premiums from life insurance business in Hong Kong to the total premiums from life insurance business both in Hong Kong and overseas during the period of the actuarial report.

Section 23A: non-life insurance

The assessable profits of a non-life insurance company are calculated under section 23A and the assessable profits are calculated similar to general principles. However, section 23A takes into account the changes in the reserves for unexpired risks that may arise from insurance policies. Any increase (or decrease) in the reserve in the year is deductible (or assessable). In determining the source of the non-life insurance policies, only polices that are made in Hong Kong or policies the proposals for which are made to a corporation in Hong Kong are included.

If the insurer is a non-Hong Kong resident company with limited business transactions in Hong Kong, the Commissioner of Inland Revenue may determine the assessable profits in Hong Kong by reference to the proportion of the total profits of the corporation corresponding to the proportion which its premiums from insurance business in Hong Kong bear to its total premiums (or on any other equitable basis).

Concession for qualified reinsurers

A reinsurer who is authorised to carry on reinsurance business in Hong Kong and derives income from the reinsurance of non-life offshore risks as a professional reinsurer can irrevocably elect to have its profits from that reinsurance business taxed at half the normal corporate tax rate (section 23A, IRO).

Premiums from the reinsurance of offshore risks are premiums in respect of the reinsurance of any risk outside of Hong Kong or in transit in Hong Kong, and the reinsured is not a person resident in Hong Kong or a permanent establishment maintained in Hong Kong, and not less than 75% of the total risk in terms of gross premiums is outside Hong Kong or is in transit in Hong Kong.

Concession for captive insurers

To attract more local and foreign enterprises to form captive insurance companies in Hong Kong, the Hong Kong profits tax rate on the offshore insurance business of captives was reduced by 50%. The objective was to provide a profits tax concession to captive insurance companies in respect of their profits from the business of insurance of offshore risks, which are typically set up to underwrite the risks of companies within the same group to which the captive insurers belong.

Insurance intermediaries

Insurance brokers and insurance agents carrying on business in Hong Kong have their profits from Hong Kong operations determined and taxed in accordance with the general principles.


Insurance and reinsurance dispute resolution

33. Are there special procedures or venues for dealing with insurance or reinsurance complaints or disputes?

There is no specialist insurance court or civil litigation procedure for resolving insurance disputes. The Hong Kong International Arbitration Centre has no specialist rules for these disputes, although it does provide a list of arbitrators, some of whom have specialist insurance knowledge.

Following an initiative launched by the Department of Justice to promote mediation as a dispute resolution method, the Hong Kong Federation of Insurers (HKFI) has signed a Mediation First Pledge to encourage its members to use mediation for dispute resolution before pursuing other methods such as litigation.

34. Are arbitration clauses in insurance and reinsurance agreements enforceable?

The principal dispute resolution methods used to settle reinsurance claims are arbitration and litigation. However, with the introduction of the Civil Justice Reforms in April 2009, there is a greater focus on the early settlement of disputes, particularly through mediation. However, generally, arbitration clauses in insurance and reinsurance agreements are enforceable by the parties, provided that the obligation to arbitrate is expressed in unqualified and mandatory terms.

35. Are choice of forum, venue and applicable law clauses in an insurance or reinsurance contract recognised and enforced?

There are no specific provisions relating to choice of forum, venue or applicable law clauses in insurance contracts. The usual common law principles are applied, in that such clauses will be recognised, provided that they are not considered by the courts to be unfair or unreasonable.



36. What proposals are there for reform of the law, regulation or rules relating to the provision of insurance or reinsurance services?

The Independent Insurance Authority

To conform with the international practice of regulators being financially and operationally independent of the Hong Kong government and to ensure that Hong Kong has a modern infrastructure for the regulation of the insurance industry, the Financial Services and the Treasury Bureau (FSTB) have proposed the introduction of an Independent Insurance Authority (IIA).

Following the publication by the FSTB in late 2012 of detailed proposals for the functions, powers, funding mechanism, governance and organisation of the IIA (which were further refined in the light of the conclusions reached in mid-2013 from a number of public consultation exercises on the subject), the necessary key amendments to the Insurance Companies Ordinance (ICO) are now expected to come into operation later this year. In this respect, the Bill to amend the ICO was gazetted on 25 April 2014 and was introduced to the Legislative Council on 30 April 2014.

The main changes to the ICO will be:

  • To replace the existing Insurance Authority (IA) with the IIA, a new regulatory body for the insurance industry in Hong Kong that is financially and operationally independent of the Hong Kong Government.

  • To modernise the insurance regulatory infrastructure by giving the IIA additional powers of oversight, inspection, investigation, discipline and prosecution.

  • To introduce a statutory licensing regime for insurance intermediaries (including banks acting in this capacity).

  • To require insurers to seek approval from the IIA before appointing "key persons in control functions".

These changes will take time to implement and the proposals acknowledge this by allowing for:

  • A lead-in time for the establishment of the IIA by establishing a provisional authority until the operative provision of the Bill becomes effective.

  • A gradual increase in licensing fees over six years.

  • The grandfathering of existing intermediary licences for a transitional period of three years.

The Bills Committee completed its deliberations on the Bill on 5 June 2015 and it is anticipated that the Bill will be passed shortly.

Risk-based capital

The Office of the Commissioner of Insurance (OCI) is currently developing the framework for a risk-based capital (RBC) regime for Hong Kong insurance business. It will be based on international standards and practices and will be formulated to comply with the applicable Insurance Core Principles issued by the International Association of Insurance Supervisors. These Insurance Core Principles are designed to achieve:

  • A clear and consistent valuation standard with risk-sensitive capital requirements.

  • Enhanced corporate governance, enterprise risk management and public disclosure.

The OCI has adopted a four-phase process for the implementation of the RBC framework:

  • Develop the framework and key approaches.

  • Develop detailed rules following a quantitative impact assessment for different types of insurers.

  • Develop amending legislation.

  • Implement incrementally.

The OCI intends to establish the RBC framework following the timetable below:

  • Consult with the industry on a proposed framework (2013 to 2014).

  • Prepare draft of details rules and perform deep-dive quantitative impact analysis (2014 to 2015).

  • Develop legislative amendments (2015 to 2016).

  • Start phased-in implementation with parallel and long run-in (2016 to 2017).

In September 2014, the OCI released its first consultation paper containing its proposals for a RBC framework. The consultation period closed on 15 December 2014. The purpose of the consultation was to familiarise the industry with the proposals on RBC and to elicit feedback on unique issues applicable to Hong Kong. The responses will be used to develop detailed proposals on RBC, including:

  • Quantitative aspects regarding capital and valuation.

  • Qualitative aspects including corporate governance, management, investment policy and capital add-ons.

  • Public disclosure of capital resources and requirements.

The proposed framework will apply to direct insurers and reinsurers whether incorporated in Hong Kong or registered as a branch of an overseas company.

Policyholders' protection fund (PPF)

The Hong Kong Federation of Insurers (HKFI) supports the establishment of a policyholders' protection fund (PPF) to provide a safety net for individual policyholders (but excluding compulsory business already covered by the Motor Insurance Bureau (MIB) and the Employees' Compensation Insurer Insolvency Bureau) by underwriting payments under their insurance policy if their insurer is insolvent. The fund (probably separate funds for general and life insurance) would be based on similar compensation schemes operating in the UK, Canada and Singapore and would be funded by a levy on premiums.

The details of the proposed scheme are as follows:

  • Compensation. The first HK$100,000 and 80% of the balance will be paid, up to a maximum of HK$1 million. It will be applied on a per-policy basis for life insurance policies and a per-claim basis for non-life insurance policies.

  • Life insurance policies. The PPF will seek to facilitate the transfer of policies of an insolvent insurer to another insurer and will be allowed to pay up to HK$1 million per policy to do so.

  • Non-life insurance policies. The PPF will provide continuity of coverage until the expiry of the policy and meet claims up to the limit of HK$1 million per claim.

  • Accident and health policies with guaranteed renewability. The PPF will be allowed to pay up to HK$1 million per policy to transfer the policy to another insurer.

During the Legislative Council Panel on Financial Affairs held on 15 January 2015, the FSTB stated in their 2015 Policy Address that they were preparing detailed legislative proposals for the establishment of the PPF.

Resolution regime for systemically important financial institutions

In January 2014, the FSTB, the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC) and the IA jointly published a consultation paper titled " An Effective Resolution Regime for Financial Institutions in Hong Kong". The consultation paper contained the legislative changes that the Hong Kong government considered necessary at the time to meet the standards developed by the international Financial Stability Board to allow systemically important financial institutions (SIFIs) to fail safely, and sought opinions in respect of its proposals.

The proposals in brief are as follows:

  • A single resolution regime, as opposed to several sector-specific regimes, determining in advance which financial institutions would be covered by the resolution regime.

  • Branches, holding companies and non-regulated operational entities of SIFIs should be covered under the resolution regime of both their home and host jurisdiction.

  • That initiating resolution under the proposed resolution regime be conditional on:

    • an assessment that a financial institution is, or is expected to become, no longer viable; and

    • an assessment that the resolution will serve to contain risks posed by the financial institution's non-viability to the continuity of critical financial services (including payment, clearing and settlement functions) and the general stability and effective working of the financial system.

  • The objectives of any resolution would be to maintain the general stability and effective working of the financial system in Hong Kong, seek an appropriate degree of protection for depositors, investors and policyholders, and seek to contain the costs of resolution and protect public fund.

  • The allocation of responsibility to the HKMA, SFC and IA to act as resolution authorities in overseeing the resolution regime, but appointing one of them as the lead resolution authority.

The proposed resolution regime includes:

  • Resolution (or "stabilisation") options.

  • Compulsory transfer of business to another financial institution or a bridge institution.

  • "Bail-in" (officially mandated creditor-financed recapitalisation).

  • Temporary public ownership.

  • Dealing with residual parts of the financial institution.

  • Transfer to an asset management vehicle.

  • Insolvency proceedings.

  • Vesting of general powers to resolution authorities (that is, powers of the board of directors and shareholders) in order to carry out the resolution regime.

  • A general stay against statutory, contractual set-off or early termination rights when resolution powers are used.

  • Vesting of powers to resolution authorities to require financial institutions to remove substantial barriers to resolution.

  • Resolution authorities to be notified of winding up proceedings against SIFIs before they can be commenced so as to give resolution authorities an opportunity to consider whether resolution measures should be taken instead of winding up.

  • Measures to safeguard parties affected by resolution measures (that is, respecting the creditor hierarchy and providing a compensation mechanism).

  • Protection from civil liability for officers and agent of the resolution authority and directors and officers of SIFIs acting in compliance with instructions from resolution authorities where these parties are acting in good faith.

  • Co-operation with resolution authorities in other jurisdictions for the resolution of global financial services groups.

In January 2015, the FSTB, HKMA, SFC and IA published a second consultation paper after considering the submissions received in response to the first consultation paper.

After considering the submissions on the second consultation paper and further expected developments at the international level, the Hong Kong Government can undertake a shorter third stage consultation before introducing a Bill into the Legislative Council by the end of 2015.


The current public healthcare system is state-funded and heavily subsidised, and is becoming an increasing financial burden on the Hong Kong Government. Many people take out private healthcare insurance (if affordable). The Hong Kong Government is therefore carrying out a consultation exercise on reforming public healthcare financing. The Hong Kong Federation of Insurers (HKFI) supports a supplementary financing model made up of three elements:

  • A progressive, measured increase in user fees for public healthcare designed to achieve cost sharing.

  • Encouraging individuals to take out voluntary private insurance as an interim measure.

  • In the long term, setting up a mandatory insurance scheme based on contributions from the Hong Kong working population.

To promote the use of private healthcare services, the HKFI is also trying to persuade the Hong Kong Government to introduce tax incentives such as tax rebates on medical expenses and private medical insurance premiums.

As of the end of 2014, the Hong Kong Government is still in the second stage of public consultation.

*The authors would like to thank Darren Bowdern, Partner in Mergers & Acquisitions Tax at KPMG, Hong Kong for contributing the response to Question 32.


Main insurance/reinsurance trade organisations

Hong Kong Federation of Insurers (HKFI)


Main activities. The principal industry body undertaking industry self-regulation.

Insurance Agents Registration Board (IARB)


Main activities. The IARB has a dual role of registering qualified insurance agents, responsible officers and technical representatives and handling complaints against them.

Hong Kong Confederation of Insurance Brokers


Main activities. An IA-approved body of insurance brokers implementing the self-regulation of insurance brokers in Hong Kong.

Professional Insurance Brokers Association


Main activities. An IA-approved body of insurance brokers implementing the self-regulation of insurance brokers in Hong Kong.

Motor Insurers' Bureau (MIB)


Main activities. Securing the satisfaction of claims in relation to liability for death or bodily injury arising from the use of motor vehicles required to be covered by the Motor Vehicles Insurance (Third Party Risks) Ordinance.

Online resources

Hong Kong Federation of Insurers


Description. Official website of the Hong Kong Federation of Insurers, maintains an up- to-date list of members.

Office of the Commissioner of Insurance


Description. Official website of the Office of the Commissioner of Insurance. The Annual Report 2012 is available on the website, along with various industry statistics published quarterly.

Census and Statistics department for Hong Kong


Description. Official website of the Census and Statistics department for Hong Kong.

International Association of Insurance Supervision


Description. Official website of the International Association of Insurance Supervision.

Contributor profiles

Richard Bates


T +852 2848 6308
F +852 2848 6333

Professional qualifications. Solicitor, England and Wales, 1989; Solicitor, Hong Kong, 1995

Areas of practice. Insurance and reinsurance; company and commercial; employment; information technology.

Recent transactions

  • Acting for QBE on its acquisition of Hang Seng Bank's general insurance operations (for a purchase price of US$396 million including HSBC's general insurance operations in Argentina) and 10-year bancassurance agreement for the sale of general insurance products to Hang Seng Bank's customers in Hong Kong and Mainland China.
  • Acting for New York Life Hong Kong on its purchase by ACE Group (for purchase price of US$425 million – including New York Life's operations in South Korea).
  • Acting for Dah Sing General Insurance on its domestication (from Bermuda to Hong Kong).

Languages. English

Professional associations/memberships. Law Society of England and Wales; Law Society of Hong Kong; British Chamber of Commerce; Hong Kong Insurers' Club; City University of Hong Kong - External Academic Advisor for PCLL; Chinese University of Hong Kong – External Academic Advisor for PCCL


  • International Agency, Distribution and Licensing Agreements – Hong Kong Chapter, FT Law & Tax (2nd Ed)
  • Hong Kong Staff Employment Manual – Data Privacy Chapter, Asia Law & Practice
  • Kennedys Corporate Insurance briefing notes including: The introduction of an Independent Insurance Authority for Hong Kong Commission Disclosure

Peter Cashin


T +852 2848 6306
F +852 2848 6333

Professional qualifications. Solicitor, Australia, 1990; Solicitor, Hong Kong, 1994

Areas of practice. Insurance and reinsurance; corporate and commercial.

Recent transactions

  • Advising insurers in various regulatory and licensing matters.
  • Advising on a new insurance scheme.
  • Advising on the acquisition of an insurance business.

Languages. English

Professional associations/memberships. Australian Chamber of Commerce; Hong Kong Insurers' Club; Law Society of Hong Kong


  • Kennedys Corporate Insurance briefing notes including: The introduction of an Independent Insurance Authority for Hong Kong and The proposed Contracts (Rights of Third Parties) Bill.
  • General Editor of the Investor's Handbook for Hong Kong, Pearson Professional (1996).
  • Regulatory and Legal Issues in Bancassurance Transactions, presented at the Asia Insurance Review Annual Bancassurance Conference in 2013.
  • Articles in a number of insurance industry journals, various dates.

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