Key Persons in Control Functions 管控要員

What Is a Key Person in a Control Function? 甚麼是管控要員

A key person in a control function is an individual appointed by an authorised insurer to be responsible for one of its control functions, usually as head of that function. Control functions are the parts of an insurer that monitor and control its risks, so they directly affect the insurer's soundness and the interests of policyholders.

The regime was introduced by the 2015 amendments to the Insurance Ordinance (Cap. 41) and took effect when the Insurance Authority (IA) took over the regulation of insurers in 2017. Its aim is to strengthen corporate governance by making sure that the people leading important control work have the necessary competence and integrity, which in turn protects policyholders.

The regime is separate from the rules on directors and controllers. Those have their own requirements; this regime covers the people who actually lead individual control functions.

The Six Control Functions 六項管控職能

The Ordinance lists six control functions. The first three are: (1) risk management, which identifies, assesses and monitors the risks the insurer faces; (2) financial control, which covers financial reporting, capital and solvency monitoring; and (3) compliance, which makes sure the insurer meets legal, regulatory and supervisory requirements.

The other three are: (4) internal audit, which independently checks whether the insurer's internal controls are adequate and effective; (5) actuarial, which deals with reserving, pricing and other actuarial matters; and (6) intermediary management, which manages the insurer's dealings with insurance intermediaries, such as the recruitment, training, supervision and conduct of its appointed agents.

In the exam, remember that underwriting, claims, marketing and product sales are business operations, not control functions. Questions often put these departments into the options as distractors.

Prior Approval and the Fit and Proper Test 事先批准及適當人選準則

An authorised insurer must obtain the IA's approval before appointing anyone as a key person in a control function. Approval by the insurer's own board alone, or notifying the IA after the appointment has been made, does not meet the requirement.

When deciding, the IA considers whether the person is fit and proper. Relevant factors include education and professional qualifications, relevant experience, ability to carry out the role efficiently, honestly and fairly, and character, integrity, reputation and financial soundness. Past criminal convictions, disciplinary action or bankruptcy are all relevant.

The IA may grant approval, grant it subject to conditions, or refuse it. If an approved person later stops being fit and proper, the IA may withdraw the approval. A person dissatisfied with such a decision may apply to the Insurance Appeals Tribunal for a review.

Role and Independence of Key Persons 管控要員的角色與獨立性

A key person makes sure their function has enough resources, authority and information to work effectively, and reports problems to senior management and the board when needed. The insurer remains ultimately responsible for its overall governance; appointing key persons does not relieve the board of its responsibilities.

Control functions need appropriate independence. Internal audit in particular should be independent of the business areas it reviews. If one person heads more than one control function, the insurer must make sure this does not create a conflict of interest, and each appointment still needs the IA's approval.