Revised Guideline on “Fit and Proper” Criteria for Authorized Insurers – Effective July 1, 2024

The Insurance Authority (IA) has recently issued a revised Guideline on “Fit and Proper” Criteria for Authorized Insurers under the Insurance Ordinance (Cap. 41) (Revised GL4), which is set to take effect on 1 July 2024. This guideline, in conjunction with the Insurance (Amendment) Ordinance 2023, introduces new criteria for majority and minority shareholder controllers, certifying actuaries, and the assessment of internal control and corporate governance structures for body corporates.

One of the key changes introduced by the Revised GL4 is the distinction between minority shareholder controllers (15% or more but less than 50% of the voting power) and majority shareholder controllers (more than 50% of the voting power) of an authorized insurer. Under the revised section 13B of the Insurance Ordinance, individuals must obtain IA approval before becoming a shareholder controller of a Hong Kong insurer or designated insurer. Additionally, the Revised GL4 emphasizes the importance of shareholder controllers’ influence on an insurer’s business strategy and conduct, with the IA applying higher standards to those with greater influence.

Furthermore, the Revised GL4 outlines qualification and experience requirements for certifying actuaries in relation to general business, as well as new criteria for assessing the fitness and propriety of body corporates. These criteria include the establishment of sound corporate governance structures, adequate internal control systems, effective risk management, and internal controls on financial reporting.

Overall, the Revised GL4 aims to ensure the long-term stability and healthy development of authorized insurers by setting clear standards for shareholder controllers, certifying actuaries, and body corporates. Stakeholders in the insurance industry are encouraged to review the IA circular and the Revised GL4 for more detailed information on the new guidelines.