The Hong Kong government has gazetted subsidiary legislation related to the commencement of the insurance group-wide supervision (GWS) framework on 29 March 2021.
Enacted in July 2020, the Insurance (Amendment) (No.2) Ordinance 2020 introduces a GWS framework for the Insurance Authority (IA) to exercise direct regulatory powers over Hong Kong-incorporated holding companies of insurance groups. For the purpose of implementing the GWS framework, the government on 31 December 2020 gazetted the following four pieces of subsidiary legislation:
(a) the Insurance (Amendment) (No. 2) Ordinance 2020 (Commencement) Notice
This names 29 March 2021, as the date on which the GWS framework will become effective.
(b) the Insurance (Designation and Annual Fees for Designated Insurance Holding Companies) Regulation;
(c) the Insurance (Prescribed Fees) (Amendment) Regulation 2020;
These regulations provide for the collection of various fees for recovering the cost of the IA in carrying out GWS.
(d) the Insurance (Group Capital) Rules
This prescribes group capital adequacy requirements as well as supervisory reporting to the IA and public disclosure in relation to group capital adequacy.
“The implementation of the GWS framework will help align Hong Kong’s insurance regulatory regime with international standards and practices. It is a testament of the government’s commitment to reinforce Hong Kong’s status as an international financial centre and establish Hong Kong as a preferred base for large insurance groups in Asia Pacific,” a spokesman for the Financial Services and the Treasury Bureau said.
“At present, the IA is the group supervisor of three international insurance groups. The selection of Hong Kong as the jurisdiction for carrying out GWS for the international insurance groups has clearly demonstrated the advantages that Hong Kong possesses as an international financial centre and insurance hub,” the spokesman added.
Mr Frank Yuen, senior analyst, Financial Institutions Group at Moody’s Investors Service, said, “The commencement of the insurance group-wide supervision (GWS) framework in March 2021 is credit positive for the three insurance groups incorporated in Hong Kong – AIA Group Limited, Prudential Plc and FWD Limited – because it will strengthen their capitalisation.
“Specifically, the GWS framework will allow the Insurance Authority to carry out direct supervision over these groups. Additionally, the group capital adequacy rules, which form part of the GWS framework, will require the insurance groups to maintain robust capital positions at both the holding company and operating company levels, and to adopt group-wide risk management frameworks.”