Industry will face a period of adjustment.
The Hong Kong Insurance Authority (IA), an independent statutory body, has taken over regulatory control for insurance intermediaries. Previously regulating insurance intermediaries was undertaken by self-regulated industry organisations.
As part of its takeover, the IA released two new Codes of Conduct for both Insurance Agents and Licensed Insurance Brokers. While both Codes took effect on 23 September 2019 the IA has allowed an introductory period to enable agents and brokers to bed down their compliance regimes before full introduction on 1 January 2020.
The new regulatory regime has introduced changes in areas such as basic academic qualifications, an increase in annual CPD training, approval of key persons, fit and proper criteria and minimum capital and net asset requirements for broker companies. The IA will also take over complaints handling and has been given increased powers in respect of imposing financial penalties of up to the greater of HK$10 million or three times the amount fo provide gained or loss avoided.
As with any new regulatory regime, there will be a period of adjustment for the industry. Increased compliance costs are expected as intermediaries will now be subjected to a higher level of scrutiny and potentially face higher consequences for failing to comply with the new Codes. We wait to see whether the IA will flex its regulatory muscle and we may see an increase in prosecutions or whether they will take a more supervisory approach. However, as the IA's new powers replicate the Securities and Futures Commission a more stringent regulatory environment is expected.
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