Hong Kong SAR – Insurance Authority highlights common compliance issues

Just over a year on from the launch of the new insurance intermediaries regime, the Insurance authority (IA) has issued three circulars highlighting common compliance issues in relation to insurance brokers, insurance agents as well as to authorised insurers. 

The circulars note that where the IA has identified potential compliance issues as the new regime has been bedding down, its approach has been to issue letters of concern or compliance advice rather than take enforcement action. However, this approach will gradually change as a stepping up of enforcement in relation to these issues can be expected. 

It is therefore imperative that firms take note of these more common issues as the IA’s expectations will be that the firms it supervises review circulars and assess whether they are in compliance.

Issues Highlighted

The circulars highlight a number of issues and provide some helpful guidance on particular questions as well as on the IA expectations. Several of the issues highlighted are relevant to all insurance intermediaries:

  • Restrictions on staff carrying out roles for both insurance brokers and agencies – the IA notes that there have been a number of queries around the extent to which a person can serve as a board director of both an agency company and a broker company and provides guidance on this issue.
  • Compliance with the IA notification requirements regarding changes in information - such as changes of address, changes in relation to Responsible Officers and regulated activities.
  • The requirement to have a Responsible Officer.

In addition, the IA highlights the importance of regular monitoring of the requirements in relation to client money, auditors and audited financial statements for insurance brokers, and reminds insurance agents of the restriction in relation to the number of insurers they may be appointed by.

For insurers, the focus is on having appropriate controls in place to enable compliance with the notifications they must make in relation to their insurance agents, as well as those in relation to their controllers, directors and key persons in control functions. Finally, the IA underlines the importance of insurers complying with any restrictions or requirements it imposes on an authorised insurer on the grounds safeguarding policy holder interests, as failure to do so may be an offence under the Insurance Ordinance and call into question the insurer’s fitness and properness.