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Hong Kong catching up in insurance regulation

  • Publish Date: Posted over 6 years ago
  • Author:by Alan Jarque

This year, Hong Kong has seen a watershed year in insurance regulatory changes.

According to Mr Peter Shelford, Country Managing Partner in Thailand of the law firm DLA Piper,  Hong Kong is working extremely hard to "play catch-up, as Singapore has been ahead of the game."

Shelford was speaking in a panel session at the inaugural Asia Pacific Insurance Conference. The conference examined recent regulatory developments in the region where global and regional insurance stakeholders face a multi-faceted regulatory landscape, marked by frontier markets and developed insurance hubs.

Ms Jaya Taylor, regional head of legal & compliance, Asia Pac for Allianz Global Corporate & Specialty SE (AGCS), spoke about the similar directions in which outsourcing rules in Singapore and Hong Kong are heading. She noted that in Singapore, where a few outsourcing requirements have been lifted, due diligence expected of the insurer has become more inconvenient which could be expected of Hong Kong in the future.

Taylor said in Hong Kong there was fit and proper criteria being looked at. While Singapore has always had them, there is some flexibility, with distinctions between tier 1 and 2 insurers. Requirements for key control functions are also as wide as in Hong Kong, where prior approvals are more precise. The implication is that recruitment may be a slightly more tedious process for those coming onboard such as compliance officers, CFOs and in-house actuaries.

In contrast with Hong Kong, Taylor said that increasing protectionism has been observed in markets such as Indonesia, India and China which means global or regional players will need to streamline processes to navigate the complexity in these different regimes.

Despite the progress made in harmonisation in the Asean Economic Community at a thought leadership level, Mr Shelford noted that significant hurdles remain on the ground.

While countries like Myanmar are seeing discouraging levels of development, there has been considerable regulatory progress in Thailand, which now allows up to 49 percent foreign ownership of insurers. Currently there are only three countries in Asean who have restrictions on ownership; Malaysia, Indonesia and Thailand.

Sharing the Taiwanese perspective, Mr CY Huang, Senior Partner, Tsar & Tsar Law Firm, Taipei, said that Taiwan is very liberal in terms of foreign participation in insurance, allowing up to 100 percent ownership.

However, foreign ownership has been limited due to factors like negative spreads. As Taiwan's market is highly regulated like its North Asian counterparts in Japan, Korea and China, the legal and compliance staff in insurance firms usually experience enormous workloads.

Providing an insider perspective of the changes in the Hong Kong regulatory arena was Ms Winnie Wong, CEO of composite insurer Asia Insurance and a member of the Financial Services Development Council (FSDC).

Ms Wong said that the difficulty faced by the four-month old Insurance Authority (IA) in placing a new CEO resulted in the appointment of the former Insurance Commissioner as acting CEO for a year while the headhunting continued. While this is not an ideal arrangement, she acknowledged it was important in providing a smooth transition to new leadership. She said that there is a good balance and mix in the experience levels of the IA's current senior executives, who come from both government and the insurance industry.

The IA was set up as an independent supervisory agency, replacing a government department, the erstwhile Office of the Commissioner of Insurance. The establishment of the IA is among the most significant regulatory reforms to the insurance industry in Hong Kong for 20 years.

She added that with market development as an important new mandate (as opposed to a purely regulatory one in the past), the IA is more pro-active and has to focus more on outreach and listening to the industry. With staff strength now of about 170, the IA will recruit up to about 300, with its work cut out in issuing new guidelines and introducing initiatives, such as the recently launched InsurTech Sandbox and fast-track licensing for online-only insurers.

On a cautious note, Ms Wong said that the IA’s approach to regulation remained to be tested, with new guidelines for intermediaries in the pipeline expected to be controversial. When that happens, the IA would expand its remit to include parties which have been used to self-regulation for several decades.

The panel was moderated by Mr Peter J Gregoire, AIG General Counsel, Hong Kong. The Asia Pacific Insurance Conference, which took place in Singapore, ends today. It is the first Asian regional conference organised by a collection of major insurance related organisations, affiliated under the auspices of the International Insurance Law Association (AIDA), and drew a lively audience of about 250 comprising legal eagles and insurance executives. Asia Insurance Review is a media partner for the conference.