Insurance Legislation, Codes and Guidelines 保險法例、守則及指引

Insurance Ordinance (IO) 《保險業條例》

The Insurance Ordinance (Cap. 41) regulates insurance business, establishes the Insurance Authority (IA) as a body corporate and deals with related matters. Its purposes include protecting existing and potential policyholders and promoting the stable development of the insurance industry.

Requirements for authorized insurers cover five areas: authorization, capital, solvency margin, the fitness and properness of controllers, directors, key persons in control functions and appointed actuaries, and adequate reinsurance arrangements. Together, these support financial soundness, proper management and the ability to fulfil policy obligations.

Under section 8, a company intending to carry on any class of insurance business in or from Hong Kong may apply to the IA for authorization. Section 8(2) prevents authorization if the IA considers any director or controller unfit for their position; sufficient capital cannot replace this suitability requirement. [IA guidance on fitness and properness](https://www.ia.org.hk/english/supervision/reg_insurers_lloyd/files/GL4.pdf)

Code of Conduct for Licensed Insurance Agents and Code of Conduct for Licensed Insurance Brokers 《持牌保險代理人操守守則》及《持牌保險經紀操守守則》

Licensed insurance intermediaries fall into two broad groups: agents and brokers, each covered by a separate IA Code released in September 2019. The Agents’ Code explains relevant conduct requirements under sections 90 and 91 of the IO; the Brokers’ Code addresses sections 90 and 92. Both also concern applicable rules made under section 94.

Each Code has eight General Principles. The first four concern honesty and integrity, fair treatment and clients’ best interests, due care, skill and diligence, and competence to advise. The Brokers’ Code also expressly requires good faith. Intermediaries should carry on only regulated activities for which they have the necessary competence.

The remaining principles concern disclosure, suitability of advice, conflicts of interest and client assets. Information must be accurate and adequate, and advice must suit the client’s circumstances. Intermediaries should endeavour to avoid conflicts and manage unavoidable conflicts with appropriate disclosure. Assets received or held for clients need sufficient safeguards. Disclosing commission does not remove the duty to manage a conflict properly.

Licensed insurance agencies and broker companies need appropriate controls and procedures covering themselves and their licensed technical representatives. Two relevant Practice Notes supplement the Brokers’ Code: one supplements Standard and Practice 5.4 on minimum information in client agreements for linked long term business; the other supplements Standard and Practice 7.1 on disclosure of remuneration received from insurers for arranging policies. [IA Codes and Practice Notes](https://www.ia.org.hk/en/legislative_framework/codes.html)

Guideline on “Fit and Proper” Criteria for Licensed Insurance Intermediaries under the Insurance Ordinance (GL23) 《保險業條例》有關持牌保險中介人“適當人選＂的準則指引（指引 23）

Issued under section 133 of the IO, GL23 explains matters the IA normally considers when assessing licensed insurance intermediaries and related persons. Its central concerns are competence, reliability, financial soundness and integrity; professional qualifications are only part of the assessment. [IA GL23](https://www.ia.org.hk/en/supervision/reg_ins_intermediaries/files/GuidelineonFitandProperCriteriaforLicensedInsuranceIntermediariesundertheInsuranceOrdinance.pdf)

An applicant for an insurance intermediary licence must satisfy the IA that they are fit and proper. For an insurance agency or broker company, its responsible officers, controllers, partners and directors must also qualify, where applicable. The assessment therefore extends to the relevant people managing and controlling the business.

Separate financial and operational requirements for broker companies appear in the Insurance (Financial and Other Requirements for Licensed Insurance Broker Companies) Rules (Cap. 41L). They cover minimum share capital, net assets, professional indemnity insurance, proper books and records, and the contents of audited financial statements and auditors’ reports. Compliance with these requirements must accompany fitness and properness.

Three Former Self-Regulatory Bodies 三間前自律規管機構

On 23 September 2019, the IA took over intermediary regulation from three self-regulatory bodies: the Insurance Agents Registration Board (IARB), the Hong Kong Confederation of Insurance Brokers (CIB, also called HKCIB) and the Professional Insurance Brokers Association (PIBA). The IARB was established under the Hong Kong Federation of Insurers (HKFI). [IA handover announcement](https://www.ia.org.hk/tc/infocenter/press_releases/20190923.html)

Established in January 1993, the IARB formerly registered insurance agents and their responsible officers and technical representatives, and handled complaints against them. The HKFI represents the common interests of insurers and reinsurers operating in Hong Kong and encourages ethical and professional standards.

CIB was formed in February 1993; PIBA was formally established on 29 January 1988. Each formerly regulated its own insurance broker members. Following the handover, they continued representing members, providing compliance support and training, and contributing to policy discussions. These industry services are distinct from the IA’s statutory regulatory functions.

Guideline on the Use of Internet for Insurance Activities (GL8) 《網上保險活動指引》（指引 8）

The internet can be used to market insurance, solicit business and serve existing or potential policyholders. GL8 aims to protect the insuring public and support healthy industry development. It covers internet insurance activities of all service providers insofar as those activities fall within Hong Kong’s jurisdiction. Online business remains subject to the IO and applicable regulatory guidelines and industry rules. [IA GL8](https://www.ia.org.hk/english/legislative_framework/files/GL8.pdf)

The guideline addresses providers’ identities, authorization status, security, client information privacy, communication methods, product sales, third-party websites and information obtained from other websites. In a website or online-service scenario, assess the activity and its applicable requirements. Using a third-party website is itself an area addressed by GL8.

Guideline on Underwriting Class C Business (GL15) 《承保類别 C 業務指引》（指引 15）

GL15 sets conduct and business standards for authorized insurers underwriting Class C, or investment-linked long term, business and must be read with other relevant regulatory documents. The IA considers the substance and nature of arrangements. The controller must ensure compliance throughout each ILAS policy’s life, while the board oversees implementation. Product design must treat customers fairly: minimum death benefits are 105% of account value, charges must be fair and proportionate to protection, and products must be sustainable.

ILAS products may be sold only to clients with both insurance and investment needs. Before advice or a contract, Financial Needs Analysis must establish their knowledge, experience, needs, priorities, circumstances, affordability and risk profile. Clear information is required before, during and after sale. Product brochures, Key Facts Statements and Important Facts Statements/Applicant’s Declarations must explain key features and risks. Clients must also understand charges, surrender penalties and their rights and obligations, including the 21-day cooling-off period.

Insurers must avoid remuneration incentives encouraging mis-selling, aggressive selling or money laundering, such as excessive first-year commission combined with a short clawback period. Insurers and intermediaries must also manage potential conflicts. Under paragraph 10.2 of GL15, remuneration must be calculated and disclosed using the IA’s prescribed methodology and format. Disclosure must be realistic, meaningful and understandable, helping clients assess whether remuneration might influence a recommendation.

Insurers must strictly follow policyholders’ investment instructions when allocating premiums. Any deviation requires both sound actuarial principles and the IA’s agreement. Insurers must also make audio-recorded post-sale confirmation calls to all ILAS clients within 5 working days of policy issue, reaffirming their understanding of the policy and their rights and obligations. [IA GL15](https://www.ia.org.hk/en/legislative_framework/files/GL15.pdf)