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Charltons advises insurers, reinsurers and intermediaries such as brokers and agencies on regulatory compliance and investigations.

The Insurance Ordinance (Cap. 41 of the Laws of Hong Kong) (the “Ordinance”) is the principal legislation regulating the insurance industry in Hong Kong.

The Ordinance introduced and established the Independent Insurance Authority (the “IA”), which replaced the Office of the Commissioner of Insurance (the “OCI”). The functions of the IA are inter alia to regulate and supervise the insurance industry for the promotion of the general stability of the insurance industry and the protection of existing and potential policy holders. The IA took over the responsibilities of the OCI of Insurance and also the regulation of insurance intermediaries from the self-regulatory organisations. The IA is now responsible for the regulation of insurance intermediaries, issuing codes and guidelines, approving licences, and is responsible for investigations and enforcement.

Insurance intermediaries include both insurance agents and insurance brokers. Insurance agents, advise on, or arrange, insurance contracts in or from Hong Kong as the agent of an insurer. Insurance brokers negotiate or arrange contracts of insurance as agents of policyholders or advise on insurance related issues.

The Ordinance requires all persons who carry on regulated activities to be licensed. A regulated activity under the Ordinance includes the act of negotiating or arranging a contract of insurance, the act of inviting or inducing, or attempting to invite or induce, a person to enter into a contract of insurance, the act of inviting or inducing, or attempting to invite or induce, a person to make a material decision or the act of giving advice.

The Ordinance establishes five types of insurance intermediaries.

Licence for business entities

Licence for individuals

Insurance broker

licensed insurance broker companies

licensed technical representative (broker)

Insurance agent

licensed insurance agency

licensed individual insurance agents
licensed technical representatives (agents)

The Ordinance has also established statutory conduct requirements applicable to licensed insurance intermediaries (section 90 of the Ordinance) as well as statutory conduct requirements which are applicable to insurance agencies (section 91 of the Ordinance) and insurance brokers (section 92 of the Ordinance). Section 90 of the Ordinance requires that insurance intermediaries act honestly, fairly, in the best interest of the policy holder and with integrity while exercising a level of care, skill and diligence that may reasonably be expected of a person who is carrying out a regulated activity.

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New Requirement for Responsible Officer/technical representative

The Ordinance requires all licensed insurance agencies and brokers to appoint a Responsible Officer (an RO), who must be a licensed technical representative and fit and proper to discharge the responsibilities of an RO. ROs will be required to use best endeavours to put in place proper controls and procedures to ensure compliance with the conduct requirements specified in the Insurance Companies Ordinance. A firm may have its licence suspended if it does not have an RO at any time.

Key persons in control functions of certain authorised insurers

Key persons in control functions must be approved by the Insurance Authority (the “IA”) under section 13AE of the Insurance Ordinance Cap. 41 of the Laws of Hong Kong) (the “Insurance Ordinance”). Section 13AE(12)(f) of the Insurance Ordinance provides for a regulatory regime relating to the intermediary management function, being one of the control functions of an authorised insurer.

This individual who is approved by the IA to be a key person in intermediary management function of an authorised insurer must be employed by the licensed intermediary and must be a fit and proper person (the “Key Person”). The Key person will be responsible for establishing and maintaining internal control measures of the authorised insurer.