Hong Kong’s new insurance regulator, to be known as the Insurance Authority, will have as its first task “cross-border enforcement” in a bid “to protect the thousands of mainlanders who represent nearly two-fifths of life policies sold in [Hong Kong] annually,” the South China Morning Post has reported.
The news comes weeks ahead of the official start of operations for the Insurance Authority, which will take over from the Office of the Commissioner of Insurance (OCI) on 26 June, as regulator for all insurance companies in the special administrative region of China, in addition to overseeing about 90,000 insurance sales staff. Currently these insurance brokers are self-regulated by their industry body.
In a story published in the SCMP‘s Sunday edition as well as online, Moses Cheng Mo-chi, chairman of the new Insurance Authority, said that the fact that many Mainlanders are buying insurance products in Hong Kong was a “positive for Hong Kong as an international insurance centre”, but he added: “These cross border transactions also mean there is a need for us to pay attention and to keep in close communication with the mainland insurance regulator, to crack down on any malpractices or mis-selling to protect the interest of all policyholders.”
He added that the new Insurance Authority will work with the Mainland-based China Insurance Regulatory Commission to ensure a high standard.
The SCMP noted that Mainland Chinese investors bought HK$49bn (US$6.28bn) worth of life policies in Hong Kong during the first nine months of 2016, representing almost 40% of all life policies sold in Hong Kong.
It quoted a number of industry practitioners and their reactions to the new regulator and what is known of its plans, including Tay Keng Puang, managing director and chief executive of MassMutual Asia, who expressed concern that the new authority could bring in excessive regulation, resulting in a rise in compliance costs for insurers.
The SCMP story came days after the Hong Kong Financial Standards and the Treasury Bureau (FSTB) published on its website a 15-page briefing on the transition arrangements for the new Insurance Authority.
As reported last year, concerns about Mainland Chinese use of Hong Kong insurance products has been a concern for the CIRC, which has warned Mainland investors to be wary of Hong Kong policies, noting that, due to less stringent regulations being in force in Hong Kong compared to the Mainland, any potential mis-selling issues arising from Hong Kong policies wouldn’t be covered by Mainland Chinese law.
Some observers said concerns about money flows out of the Mainland, which investments in Hong Kong insurance product are, were another concern of the CIRC.
Hong Kong announced plans to replace the OCI, a government body established to administer the Insurance Authority, the regulator for the insurance industry in Hong Kong, late in 2015. The new independent body will possess wider-ranging powers and a specific remit to regulate insurance intermediaries directly as well.