Asia-Pacific
Hong Kong Insurance Regulator Launches Groupwide Supervision Rule

• David Pilla
• May 2021
• 

Night shot: An aerial view of Hong Kong’s financial center.

Hong Kong's insurance regulator has launched a groupwide insurance supervision framework while working on a regulatory regime for groupwide insurance-linked securities business in the wake of legislative amendments.

“The GWS framework is in full alignment with international standards and best practices, positioning Hong Kong as an ideal base for large insurance groups and a coordinator of supervisory efforts among all relevant jurisdictions in Asia-Pacific,” Clement Cheung, chief executive officer, Hong Kong Insurance Authority, said in a statement. “This is a central element of our strategic campaign to reinforce the status of Hong Kong as a global risk management center and a regional insurance hub.”

The Insurance Authority said it engaged closely with industry stakeholders to develop a guideline on group supervision with principles and standards for designated insurance holding companies in areas including enterprise risk management, corporate governance, capital requirements and public disclosure.

The launch of the guideline will help the regulator effect formal designations for three insurance groups—AIA Group, FWD Group and Prudential plc—by mid-2021.

In late December 2020, the HKIA closed a public consultation on insurance group capital rules that the agency said at the time it planned to roll out in 2021 to complement a new supervisory framework for multinational insurance groups.

The proposed Group Capital Rules were forwarded to the Hong Kong Legislative Council at that time.

For the regulation of ILS business, the Insurance Authority said it is “ironing out implementation details by drawing reference from overseas experience while taking into account local circumstances.”

The regulator said its pilot ILS grant scheme, recently announced by the financial secretary, will help attract potential sponsors. The first issuance is expected this year.

The Insurance Authority said legislative amendments seek to expand the scope of insurable risks for captives, transforming Hong Kong into a preferred domicile for captives formed by state-owned enterprises from mainland China, multinational conglomerates and local corporates.

“Coupled with the tax concessions for the general reinsurance business of direct insurers, selected general insurance business of direct insurers and selected insurance brokerage business, these initiatives will inject impetus into the development of marine and specialty risks insurance in Hong Kong,” the regulator said.

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