The bill also introduces an obligation for all licensed insurance intermediaries to act „in the best interests of policyholders“ (Article 89). During the consultation process, it was pointed out that insurance agents in Hong Kong are liable to insurers and not to policyholders. The Legislative Council letter raised this concern as follows: „In order to allay insurance agents` concerns about a possible conflict of loyalty to the insurer and the customer, it is stipulated that any clause of agreement between the insurer and its representative that violates the legal obligation of „Best Interest“ is unenforceable“ (Article 68A, paragraph 1). If this provision of the law is enshrined as it is in the law, it would be a departure from existing legislation, would go beyond the requirement in other jurisdictions for agents to act fairly towards their clients, and should be taken into account when developing agency contracts. The Legislative Council letter and the bill are available on LegCo`s website at: Brief and Bill. Appendix E of the Act indicates that there are currently 150 officers in the Office of the Insurance Commissioner (OIC), including the Insurance Commissioner, 48 Insurance Officers (IMO), 22 General Officers and 79 Public Service Officers (NCSC). It is proposed that, in order to achieve the desired institutional independence and operational flexibility, AI should recruit its own staff, by hiring current OIC staff, converting them to other divisions or otherwise implementing them (some OIC staff are expected to apply for IIA roles). Ai is likely to have more than 50% more staff than the OIC currently (approximately 240 employees). This increase is partly due to the fact that AI will assume the regulatory tasks of HKFI, CIB and GDPA. The legislative council letter lists two AI objectives: the supervisory regime – the guarantee of the financial health of insurers; Regulation – so that the sale and resale of insurers and insurance intermediaries is done honestly, fairly and professionally. With respect to prudential regulation, the Legislative Council notes that „the challenges for the coming years will be to implement a risk-based capital framework for insurers and to meet IAIS requirements for macroprudential monitoring, group-wide oversight and corporate governance of insurers.“ With regard to the regulation of behaviour, the Legislative Council notes: „The public`s expectation of robust oversight of insurance intermediaries has increased, particularly as insurance products become increasingly sophisticated and diversified (such as … Pensions… For more information, please contact Caroline Thomas, associates at 852 3983 7664 or caroline.thomas@hfw.com or Partner Richard Spiller, on 44 20 7264 8770 or richard.spiller@hfw.com.

The II will be self-financed (saving HK110 million per year in the public fund as it is the recurrent funding of the OIC). The proposal provides that the government provides the AI with a lump sum of HK500 million to facilitate its initial operations and that, finally, the IGE be financed exclusively by fees payable by insurers and insurance intermediaries, user fees for the provision of specific services by AI and a 0.1% levy on insurance premiums.

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