The new statutory licensing and conduct regime for insurance intermediaries comes into operation on 23 September 2019. One of the new statutory provisions which comes into effect on that day and which directly affects insurers (other than captives) relates to the intermediary management control function.
The intermediary management control function is relevant to insurers that enter into insurance contracts through, or accept referral business from, Hong Kong insurance intermediaries and the function is to establish and maintain appropriate internal control measures in relation to those arrangements.
This is the sixth designated control function for insurers which requires proposed appointees to be pre-approved by the Insurance Authority having satisfied it that they are fit and proper for the role. A control function is one of the specified key functions which is likely to enable the individual who is solely or jointly responsible for its performance to exercise a significant influence on the insurer's business. The existing control functions (actuarial, financial control, compliance, internal audit and risk management) came into operation in June 2017 when the Insurance Authority took over from the Office of the Commissioner of Insurance as the Hong Kong regulator for insurers.
Insurance Authority Circular
The Hong Kong Insurance Authority has issued a circular to insurers in respect of the transitional arrangements for the roll-out of the requirements applicable to the key person in the intermediary management control function.
Not all insurers will have a key person in the intermediary management control function. The circular makes clear that it is up to the individual insurer to determine whether this role is required as part of the insurer's corporate governance structure. The circular provides non-exhaustive factors to consider in making this determination. If the insurer decides not to appoint a key person to this function, it needs to be able to justify to the Insurance Authority the rationale for not doing so and to demonstrate the adequacy of its internal controls and corporate governance structure without an appointed key person in intermediary management control function.
Under the transitional arrangements:
- insurers should complete and submit to the Insurance Authority the reply slip to the circular no later than 20 September 2019
- if applicable, completed applications and the application fee in respect of the proposed appointee to the role of key person in the intermediary management control function should be submitted to the Insurance Authority on or before 20 December 2019.
For advice on the application of the key person in control function requirements or any compliance-related issues relating to the new regime, please contact Joyce Chan, Gill Morrissey or your usual Clyde & Co contact.