Charltons provides transactional and regulatory advice to reinsurance and insurance companies, insurance agents and brokers operating in the insurance sector, as well as financial service intermediaries, investment banking firms, hedge funds and other intermediaries that provide services to or do business with insurance companies. We have experience in a wide range of domestic and international insurance and reinsurance transactions, as well as related Hong Kong insurance law and regulatory matters. We have experience of the regulatory framework for insurance companies.
Our experience includes corporate and financing transactions for the insurance industry, such as M&A, joint ventures, corporate reorganisations and restructurings, and debt and equity financings. We also advise on regulatory issues, including applications to the Insurance Authority for authorisation to carry on insurance business in Hong Kong. We acted as Hong Kong legal adviser to the major shareholder of AIA, which raised more than HK$159 billion in its 2010 IPO. Charltons can also offer assistance on litigation, arbitration and insolvency matters.
Charltons provides an insightful and highly personalised service, supporting clients operating in the insurance sector on complex issues by providing them with high impact, smart and practical advice. We develop strong relationships with our clients, which gives us a deep understanding of key business issues in the insurance sector. We also advise clients on key developments in the regulatory framework for insurance companies carrying on business in Hong Kong, such as the proposed implementation of a new statutory licensing regime for insurance intermediaries and the establishment of the Independent Insurance Authority.
Charltons has experience in issues relating to Hong Kong insurance law and the regulatory framework for insurance companies.
The Hong Kong insurance market is a highly competitive market. According to the Office of the Commissioner of Insurance (the “OCI”), as at 31 December 2014, there were 158 authorised insurers, half the authorised insurers are Hong Kong incorporated companies, being either local insurers or subsidiaries of foreign insurance companies. Most common home jurisdictions for foreign insurance companies operating in Hong Kong are the United Kingdom and Bermuda, followed by the United States.
Among the 158 authorised insurers, 95 were pure general insurers, 44 were pure long-term insurers and the remaining 19 were composite insurers.
Long-term insurers are insurers engaged in the following classes of insurance:
life and annuity, marriage and birth, linked long term, permanent health, tontines, capital redemption, retirement scheme management category I, retirement scheme management category II and retirement scheme management category III.
General insurers are insurers engaged in following classes of insurance:
accident, sickness, land vehicles, railway rolling stock, aircraft, ships, goods in transit, fire and natural forces, damages to property, motor vehicle liability, aircraft liability, liability for shops, general liability, credit, suretyship, miscellaneous financial loss, and legal expenses.
Composite insurers are insurers engaged in both long-term insurance and general insurance businesses.
Insurance intermediaries and agents
As of 30 September 2014, Hong Kong has:
- 650 insurance brokers – persons who carries on the business of negotiating or arranging contracts of insurance in or from Hong Kong as the agent of the policy holder or potential policy holder or advising on matters related to insurance agents
- 9,621 chief executives and technical representatives:
- a chief executive of an insurance broker generally refers to a person who is responsible for the conduct of the insurance broking business of such insurance broker
- a technical representative of an insurance broker means a person who provides advice to a policy holder or potential policy holder on insurance matters for such insurance broker, or negotiates or arranges contracts of insurance in or from Hong Kong on behalf of that insurance broker for a policy holder or potential policy holder
- 43,603 individual insurance agents and 2,462 insurance agencies – person who holds himself out to advise on or arrange contracts of insurance in or from Hong Kong as an agent or subagent of one or more insurers”
- 27,085 responsible officers and technical representatives of insurance agents:
- a responsible officer of an insurance agent generally means a person who is responsible for the conduct of the insurance agency business of such insurance agent
- a technical representative of an insurance agent means a person, not being an insurance subagent, who provides advice to a policy holder or potential policy holder of on insurance matters
Current regulatory system
The statutory requirements relevant to Hong Kong insurance companies are set out in the Insurance Companies Ordinance (“ICO”) and its subsidiary regulations. The ICO is administered by the OCI.
The ICO establishes the position of the Insurance Authority and the OCI is appointed by the Hong Kong Chief Executive, as the Insurance Authority to regulate and supervise the insurance industry to ensure compliance with the ICO.
The current regulation system for the insurance intermediaries in Hong Kong is a self-regulatory system. Insurance brokers, their chief executives and technical representatives need to be either authorised by the OCI or become a member of one of the two approved broker bodies, namely The Hong Kong Confederation of Insurance Brokers and Professional Insurance Brokers Association. Insurance agents, their responsible officers and technical representatives are required to be registered with and subject to the monitoring by the Insurance Agents Registration Board set up by The Hong Kong Federation of Insurers in accordance with the Code of Practice for the Administration of Insurance Agents.
New regulatory regime
Following several years of public consultation, the Insurance Companies (Amendment) Bill 2014 (the “Bill”) was presented to the Legislative Council for first reading on 30 April 2014. The major objectives of the Bill are to establish an independent Insurance Authority and a statutory licensing regime for insurance intermediaries to replace the current self-regulatory system.
Under the proposed new regime, subject to certain proposed transitional arrangements, a person is required to obtain a licence from the independent Insurance Authority to carry on “regulated activities”, which would include activities in relation to giving advice on insurance and sale and after-sale administration of insurance policies, in the course of their business or employment or for reward, with certain exemptions.
The Independent Authority, similar to other financial regulators in Hong Kong, will be vested with powers of inspection, investigation and imposing disciplinary sanctions.
It is expected that the Bill will be enacted in 2015.
Charltons has experience in issues relating to Hong Kong insurance law and the regulatory framework for insurance companies, and can provide regulatory advice.