The Financial Services & the Treasury Bureau today proposed to establish a policy holders’ protection scheme (PPS) and launched a three-month consultation exercise to collect public views.
The proposals sets out key features of the PPS including coverage, level of compensation, a funding mechanism and governance arrangements.
A Policy Holders’ Protection Scheme Board is proposed to oversee the operation of the PPS, with the Insurance Authority serving as the administrative arm.
There will also be the Long Term Fund and the General Fund, which will respectively cover the majority of long term policies and general policies underwritten by direct insurance companies.
The PPS will adopt a progressive funding model, seeking to collect an initial levy to build up a reserve and an additional levy upon occurrence of an insurer insolvency where necessary. Insurers participating in it have to pay an initial levy at the rate of 0.07% of the applicable premiums.
The PPS may borrow from a third party to bridge a liquidity gap and impose an additional levy up to the 1% of the applicable premiums in case the PPS does not have sufficient funds to meet all liabilities of an insurer insolvency.
The proposals also include a compensation limit under the PPS. Views from all quarters of the community on the three respective $1 million, $2 million or $4 million options of the cap are sought.
The PPS will focus on individual policy holders at the initial stage of implementation, and expand to cover small and medium-sized enterprises as and when conditions are ripe.
Secretary for Financial Services & the Treasury Christopher Hui said the policy holders’ protection scheme will provide an additional safety net for policy holders in addition to the prevailing prudential regulatory regime.
“This will strengthen market stability, enhance public confidence in the insurance industry and further benchmark the regulatory regime in Hong Kong with international standards and best practices.”
Views can be posted to the Financial Services & the Treasury Bureau on 24/F, West Wing, Central Government Offices, 2 Tim Mei Avenue, by fax: 2527 0292 or by email on or before March 31, 2023.