Commencement of the group-wide supervision framework and regulatory regime of insurance-linked securities business
29 March 2021
Legislative amendments on the group-wide supervision (GWS) framework and regulatory regime of insurance-linked securities (ILS) business became effective today (29 March 2021).
“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,” said Mr Clement Cheung, Chief Executive Officer of the Insurance Authority (IA). He added that “This is a central element of our strategic campaign to reinforce the status of Hong Kong as a global risk management centre and a regional insurance hub.”
The IA has engaged closely with key industry stakeholders in developing the Guideline on Group Supervision which spells out principles and standards for designated insurance holding companies on a wide range of areas including enterprise risk management, corporate governance, capital requirements and public disclosure. The launch of this guideline will stand us in a good stead to effect formal designation of the three related insurance groups1 by mid-2021.
On regulation of ILS business, the IA is ironing out implementation details by drawing reference from overseas experience while taking into account local circumstances. The Pilot ILS Grant Scheme recently announced by the Financial Secretary will also provide added attraction to potential sponsors, and the first issuance is expected to take place within this year.
Apart from the GWS framework and regulatory regime of ILS business, the legislative amendments seek to expand the scope of insurable risks for captives, thus transforming Hong Kong into a preferred domicile for captives formed by state-owned enterprises from the Mainland, multinational conglomerates and local corporates. Coupled with the tax concessions for all 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.
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1AIA Group, FWD Group and the Prudential plc Group