On Friday, the Hong Kong government announced the gazettal of 14 subsidiary legislations under the Insurance Ordinance (Cap. 41), marking an important step towards finalising the implementation of a Risk-Based Capital (RBC) regime in the Special Administrative Region.
The legislative changes are still subject to the formality of negative vetting by the Legislative Council on 8 May 2024; however, in a LinkedIn announcement, the Insurance Authority confirmed its expectation that they would become operational on 1 July 2024.
The Insurance (Amendment) Ordinance 2023, enacted in July 2023, laid the groundwork for the RBC regime. The new subsidiary legislation includes amendments and new rules that will help facilitate the operationalisation of RBC in Hong Kong.
The changes encompass various aspects of the insurance business, from actuaries’ qualifications to the maintenance of assets in Hong Kong. They aim to strengthen insurers’ financial robustness and ensure closer alignment with international standards.
In a statement on LinkedIn, the Insurance Authority (IA) welcomed the gazettal of the 14 subsidiary legislations, confirming: “The RBC regime will come into operation on 1 July 2024, while the provisions on licensing and related fees payable by intermediaries will become effective on 23 September 2024.”
Three-year transitional period
The IA had announced the finalisation of the new Risk-based Capital (RBC) regime rules on 26 April, following a period of industry consultation (see story below).
“Respondents were generally supportive of the proposals outlined therein, with comments mainly on areas such as capital requirements and valuation of assets and liabilities.
The IA has made amendments to certain original proposals after careful consideration of the feedback received,” the regulator said in a press release at the time.
The IA also detailed the amendments it had made in its consultation conclusions.
One of the fundamental changes was an amendment that extended the transitional period for submitting required statements, reports, and information from two to three years. This phased approach provides insurers and intermediaries adequate time to adjust to the new regulatory landscape.
A similar extension for the transitional period for market risk capital requirements has been implemented, contingent upon insurers providing adequate justification and a viable capital restoration plan.
The amendments also addressed industry feedback on issues including the valuation of assets and liabilities, the exemption criteria for appointing actuaries in general business, the maintenance of assets in Hong Kong, and specific regulations for marine, captive, and Lloyd’s insurers.
The IA added that it is also considering incentives for green bond investments, with details to be specified in future guidelines.
